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| ▲ | austin-cheney 2 hours ago | parent | next [-] |
| That's not accurate. This is debatable but subprime loans were mostly accurately rated. They were rated very low. That low rating was the ultimate precursor to the crash, because it means banks carrying those poorly rated vehicles needed to balance them with different highly rated vehicles to keep their own rating high enough to qualify carrying and lending other financial assets on their books. There were so many of these shitty loans that they had to repackage them to dilute their value/rating against their other highly rated assets, because there are limited number of highly rated assets any given bank could acquire at a moment. That dilution was called a credit default swap, which is bundling under the guise of an insurance vehicle. This magnified the problem for two reasons: First these shitty assets can now be traded in large bulk and secondly any given bank can now carry more of them before further eroding their value. That proved catastrophic because this toxic debt could not be moved fast enough by anybody that held them. Its like hot potato or musical chairs, like Bitcoin. The only real difference between those credit default swaps and Bitcoin is only that everybody knows Bitcoin is intrinsically worthless and only exists as an instrument of speculation while many people actually thought these credit default swaps were real financial assets and that they were insured. |
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| ▲ | loeg 2 hours ago | parent [-] | | The other parts of the 2008 crisis are even more dissimilar to this scenario than the MBS ratings. | | |
| ▲ | cyanydeez 2 hours ago | parent [-] | | Right, this is more like wash trading, in that companies like Meta are trying to syntehtically make it look like there's more assets involved in AI than there really are. |
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| ▲ | tyre 4 hours ago | parent | prev | next [-] |
| Isn’t part of its creditworthiness how much debt it’s carrying? And if it’s shifting that off of its balance sheet, then it appears in better shape than it actually is. |
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| ▲ | venturecruelty 2 hours ago | parent | prev | next [-] |
| Enron had great creditworthiness, too. They are, famously, a very rich and powerful company today. |
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| ▲ | sethops1 3 hours ago | parent | prev | next [-] |
| Except they're taking on a huge amount of debt, enough that it would lower their credit rating, which is why they're trying to offload it ... |
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| ▲ | underlipton 4 hours ago | parent | prev [-] |
| Until they don't. Lest we forget that Facebook's new handle was borne out of a pivot that's sunk almost a hundred billion dollars while being having been largely sidelined/abandoned. (I know that they're still doing a good deal of R&D, which is good, and a worthy investment, but 1) Carmack left, and 2) We apparently don't judge corporations on whether or not they're contributing to society, but only on whether they're in the red or black.) |
