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View Diary: Closely-Watched Court Decision Breaks Bad for Wall St. Has A Day of Reckoning Arrived? (154 comments)

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  •  No risk for banks (12+ / 0-)

    My bank kept themselves above the sub-prime market. They were proud of that. A friend of mine who worked in the bank told me a story in 2009: some younger MBA guys (including this friend) from the commercial side went into the execs and pitched them to run an 'agency' operation--instead of only accepting the 'quality' loan apps, offer loans to everyone, skim off the 'quality' loans for the bank to underwrite, while giving the young-gun team the crap to act as agents for Countrywide and Wells. The execs agreed, gave them a little office across the street, some phones, a few computers, and let them run.
    In one year during their operation, the profits for acting as sub-prime agents was fully half the bank's net earnings. It was a goldmine, and best of all (my friend explained to me with a huge smile) the bank held no risk; all the risk was sold by Countrywide and Wells down the pipe as bundled investments.
    It's a weird world we live in.

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