Legal Commentary

Yves Smith on Credit Risk Study

By Ethan Brown

Yves Smith writes approvingly of the study on credit risk during the financial crisis that I linked to yesterday and makes a couple of points that are probably familiar to everyone following the financial crisis but are worth repeating--repeatedly--because Geithner and co. and their supporters seem to be getting everything so wrong.

1) Prior to the financial crisis, there was a "gross underpricing of risk"; 2) The plummeting value of assets represents a "return to rationality," so what we're seeing is NOT, as Geithner and co. argue, an irrational flee from risk or a fire sale.

In sum, as I wrote yesterday: toxic assets, toxic after all.

Full post as published by TalkLeft on April 07, 2009 (boomark / email).