Funny, but obviously the wrong thesis. I still suggest shooting uncle ben an e-mail with your theory.
The real reason is leverage. Now, they didn't know they were leveraging themselves when they bought these securities, but then when they brought them onto the balance sheet, they realized they were screwed.
It's all leverage. You can look at the debt to equity ratio, and see that it was astronomical. Fortune's thesis is a much more valid one.
The theory goes, the compensation is geared toward overleveraging a small scalp into big profits. This led them to overleverage themselves on what was perceived to be "easy money." Any company allowing itself to have debt/equity ratios above 1 are getting what they had coming to them. That's a very simple way of explaining it, though certainly not as entertaining as a wimpy name.
The real reason is leverage. Now, they didn't know they were leveraging themselves when they bought these securities, but then when they brought them onto the balance sheet, they realized they were screwed.
It's all leverage. You can look at the debt to equity ratio, and see that it was astronomical. Fortune's thesis is a much more valid one.
The theory goes, the compensation is geared toward overleveraging a small scalp into big profits. This led them to overleverage themselves on what was perceived to be "easy money." Any company allowing itself to have debt/equity ratios above 1 are getting what they had coming to them. That's a very simple way of explaining it, though certainly not as entertaining as a wimpy name.
