[quote=Allan from Fallbrook]
While we don’t have the space to get into all of the details, I think its safe to say that Wall Street’s mission and priorities became tied to short-term bonuses and compensation and thus we saw the explosion of investment products, like CDOs, MBS, etc, that produced the largest bonuses for groups like Lehman, Bear and Goldman Sachs. Combined with the insane amount of leverage that was present and the inherently poor quality of the products themselves, the meltdown became inevitable.
I think if you go back in time and look at groups like Goldman, Merrill and Bear Stearns when they were partnerships and not publicly floated corporations and back when leverage was reasonable and controllable, I think they did a much better job of allocating capital. [/quote]
Incentives matter.
When you combine huge financial companies with legions of employees for whom the present value of their cash compensation is greater than the present value of their ownership stake… you’re begging for trouble.
