Wednesday, September 17, 2008

Not worth the paper it wasn't written on

More trust - unsurprisingly. This from former US labour secretary, Robert Reich. Here's his Wikipedia entry.

The Street's fundamental problem isn't lack of capital. It's lack of trust. And without trust, Wall Street might as well fold up its fancy tents. Financial markets trade in promises—that assets have a certain value, that numbers on a balance sheet are accurate, that a loan carries a limited risk. If investors stop trusting the promises, financial markets can't function.Yet it's turned out that many of these promises weren't worth the paper they were written on. The subprime mess triggered the collapse of trust, but financial markets were in danger of such a fall even before mortgage-backed loans were shown to be worth far less than anyone supposed. That's because when the market was roaring a few years back, many financial players had no idea what they were buying or selling. Even worse, they didn't care, as long as they were making money.

What is perhaps more surprising is this article's title. From

No comments: