Wall Street bankers allegedly profited from the many mortgage loans that began to sour back in 2008, in some cases possibly pocketing money that was collected on the mortgages. Louise Story, Wall Street and finance reporter for The New York Times, examines this theory, which surfaced in a recently unsealed lawsuit against a mortgage unit at Bear Stearns. She follows a money trail that seems to lead back to some shady action on Wall Street.
It worked like this: Mortgage insurers bought bundles of mortgages from the banks. When mortgages started to go bad, the banks didn't tell the insurers, instead they went to the mortgage companies and claimed that they needed to be refunded for the bad mortgage. So, the banks got paid, the securities companies did not. Now, they're suing. To further complicate the situation, some of the banks didn't get paid straight away, but got deals on future mortgage bundles. It's a complicated story, but one which shows, once again, how the system seems to protect the money makers. Read Louise Story's article here.