, Columnist
Banks May Have Mispriced Things That Had No Price
Can you sell bonds for more than you think they're worth? Oh, sure, why not, but there'll probably be a federal investigation anyway.
There's not a ton of detail in this Wall Street Journal article about federal regulators' "wide-ranging examination of mortgage-bond sales by banks in the years that followed" the financial crisis but ooh boy is it interesting. The examination seems largely metaphysical, looking not so much into the banks' e-mails as their souls. Here:
So what aspects of a mortgage-backed security "are important enough to affect the decision to buy or sell"? A conventional answer would be something like "the creditworthiness of the underlying borrowers, the values of the homes used as collateral, etc." And there've been lots of lawsuits about banks that misrepresented those sorts of things in the pre-crisis period and have gotten in bad trouble.1