Funds Hub

Money managers under the microscope

Chicken Little was Quite the Optimist


By Martin de Sa’Pinto


If the sky falls, at least you know how far it can go – the worst case scenario is that it will hit the ground.


That’s not the case for the hedge funds, asset managers and banks exposed to toxic assets.


rtr22p3jAt the onset of the subprime crisis (identified in early 2007 although it began way before that), pundits who offered a worst case scenario of $200 billion in mortgage losses were accused of alarmism. That was in June 2007.


Those numbers only referred to defaulted loans. The effect of these defaults on securitized products such as collateralized debt obligations could only be guessed at, and at the time, few were guessing.