Who needs regulation anyway? Free and easy money for all and predatory banking practices never hurt anyone, right?
Subprime mortgages - home loans given to borrowers with weak credit - have been a lucrative business for investment banks, which buy the loans, repackage them and sell them to investors around the world, including pension funds and hedge funds.Looks like a solid group that doesn't need to be regulated in any way at all. If you can overlook the overlap between the Big Finance names caught up in this problem as well as the recent SEC investigation into insider trading, everything will be fine and you can easily understand why regulation is not necessary, that industry can self-regulate. Just don't look too closely.
But cracks in the subprime sector have been surfacing at an alarming speed. On Monday, No. 2 subprime lender New Century Financial warned that it faces $8.4 billion in loan repayment obligations - little more than a week after revealing doubts about its ability to survive.
New Century also disclosed that it had financing deals with some of the nation's biggest investment and commercial banks, including Morgan Stanley, Citigroup, Bank of America and the mortgage division of Goldman Sachs.
