Wall Street and sub-prime

http://www.nytimes.com/2007/12/06/business/06hedge.html?ex=1354597200&en
=ee60a35aacff1a9c&ei=5089&partner=rssyahoo&emc=rss
As the subprime loan crisis deepens, Wall Street firms are increasingly
coming under scrutiny for their role in selling risky mortgage-related
securities to investors.

Many of the home loans tied to these investments quickly defaulted,
resulting in billions of dollars of losses for investors. At the same
time, many of the companies that sold these securities, concerned about
a looming meltdown in the housing market, protected themselves from
losses.


The Wall Street banks that foresaw problems say they hedged their
mortgage positions as part of their fiduciary duty to shareholders.
Indeed, some other companies, particularly Citigroup, Merrill Lynch and
UBS, apparently did not foresee the housing market collapse and lost
billions of dollars, leading to forced resignations of their chief
executives.

In any case, the bankers argue, buyers of such securities -
institutional investors like pension funds, banks and hedge funds - are
sophisticated and understand the risks.

Wall Street officials maintain that the system worked as it was
supposed
to. Underwriters, they say, did not pressure colleagues on trading
desks
or in research departments to promote securities blindly.