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Monday July 30, 2007
The Soft Bigotry of Low Investor Expections
One of the ongoing themes of news coverage of the subprime market is the concept that investors in high-rated CDOs backed by subprime mortgages "didn't know what they were getting." Sunday's New York Times contains a particularly egregious example [subscription article]:
Investors bought into the myth of highly rated securities even though their generous yields should have alerted them to risks.
Er, no. Quite the opposite, actually -- the highly-rated securities carried generous yields because investors did recognize the risks, and demanded they be compensated for them. Last I checked, Wall Street wasn't in the charity business.
Luckily, you can turn to The Bond Buyer for a more sober assessment of exactly how long the subprime market's tentacles reach: In the case of municipal housing bonds, the answer seems to be: Not far. [free article]
UPDATE: The "free article" from The Bond Buyer is now free. Sorry for any inconvenience.
Posted by bondbuyer [The Morning Read-Around] ( July 30, 2007 11:11 AM ) Permalink | Comments[1]
Can you update the link, please?
Posted by Keith Pagan on July 30, 2007 at 11:20 AM EDT #