Investment banks and financial giants failed for a simple reason, and it had nothing to do with short-selling.
They failed because their CEOs responded to Wall Street’s demand for smooth, mindless 15% annual earnings growth by jumping on the subprime bandwagon and stuffing their balance sheets with toxic levels of those poisoned assets.
It happened at Wachovia, it happened at AIG, it happened at Freddie Mac, it happened at Lehman, it happened at Fannie Mae.
Warren Buffett—no slouch when it comes to reading balance sheets—was so distrustful of Fannie and Freddie management’s artificially targeting 15% earnings growth to satisfy Wall Street that he sold all his stock in those two companies in 2000.
written by Jeff Matthews read full article here
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