It comes down to credit ratings agencies. Big firms holding all these toxic financial assets started getting downgraded as credit risks. The downgrade in their credit rating made it impossible for them to borrow money at a time when they most needed to borrow money, leading to the collapse of Bear Stearns, Lehman, the mess at AIG, etc.
Why did no one see it coming? Well, in a very broad sense, a lot of people saw the Freddie and Fannie mess coming, and they warned Congress about it, but Congress failed to act. As to the specifics why no one knew a month ago, I think the issue is opacity of risk. These organizations got into the business of these highly complex financial derivatives and outsmarted themselves. They didn't know, they still don't know, exactly what they own or what the risks are in their investments. As a result, no one will lend money to anyone else in the financial industry, so the entire credit market has ground to a halt. I'm not a big fan of Bloomberg, CNBC, etc, but it's worth watching right now to help fill in the gaps on what Wall Street is watching right now. On Wed, Sep 24, 2008 at 9:35 PM, Beth wrote: > > Does no one else have any sense of urgency about this problem? Holy shit, > > lay aside the political issues until this is resolved. > > > I think that some of us are curious how this wasn't a crisis a month ago > and > all of a sudden its an emergency > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/CF-Community/message.cfm/messageid:270754 Subscription: http://www.houseoffusion.com/groups/CF-Community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=11502.10531.5
