How Missed Signs Contributed to a Mortgage Meltdown
'Ample Warning Signs' Ignored In Mortgage CrisisNew York Times NELSON D. SCHWARTZ and VIKAS BAJAJ August 19, 2007 10:42 AM
All through last year, Jim Melcher saw the signs of a rapidly deteriorating American housing market -- riskier mortgages, rising delinquencies and more homes falling into foreclosure. And with $100 million in assets at his hedge fund, Balestra Capital, he was in a position to do something about it.
So in October, as mortgage-backed bonds were still flying high, he bet $10 million that these bonds would plunge in value, using complex derivatives available to any institutional investor. As his gamble...
All through last year, Jim Melcher saw the signs of a rapidly deteriorating American housing market -- riskier mortgages, rising delinquencies and more homes falling into foreclosure. And with $100 million in assets at his hedge fund, Balestra Capital, he was in a position to do something about it.
So in October, as mortgage-backed bonds were still flying high, he bet $10 million that these bonds would plunge in value, using complex derivatives available to any institutional investor. As his gamble...
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