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In Mortgage Meltdown, Missed Signs
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Provides another view of what was covered in detail in a WSJ article on the role of the ratings agencies in this subprime mess. Lehman Brothers and Morgan Stanley say that there were signs of the problems even a year earlier, HSBC a British bank set aside $1.76 billion to cover potential losses, and a former Federal Reserve Governor published a book in June on subprime mortages going bust. So for ratings agencies to wait till July 2007, to reduce their ratings makes them look ridiculous. Lehman's Malvey, global fixed income strategist quoted here sees a recession in 2008 into 2009, as the impact spreads to retail stores and to car buyers. One reason for this is that jumbo loans on homes are going to cost much more than before, slowing the housing market even more, and the number of housing loans going bad will rise in coming months.
Economic and sales forecasts in the boom years before the 2008 financial crisis, and well into the downturn, that lost objectivity and analytical focus.
07/14/2005
How objectivity and analytical focus was lost as company and association management in the housing, auto and other industries, and their economists tried to believe and maintain the status quo. A similiar situation at the US central bank, the IMF, and other locations. The tendency to be upbeat and ignore emerging danger signs requiring a more realistic assessment. And the frequent revisions as a result of this.
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