It was a great ride up...and a painful ride down.
I had a buddy who made out like a bandit. He got out about a year before the frenzy reversed. He cashed out and sat on the sidelines.
Too bad for him he lost close to a million in the financial collapse. Had a lot of money in a local bank that went under.
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And people still trust banks. They tend to be one of the first things to fail when things go bad (local ones).
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Yeah he was a stockholder in it so he was on the right side of the trust, owning a piece of the bank.
Too bad for him the bank had a balance sheet loaded with mortgage backed securities that all were AAA rated and went to shit.
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Lol. This is what happens when you sign off a bunch of loans and people stop paying. Debt is both a good and bad thing. In good times, you are euphoric and in bad times, you are down in the gutters.
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Well it was a really ironic situation.
The bank was a local one and was doing all the crazy shit other banks were doing during the real estate boom. After all if you dont someone else will.
He was concerned about the bad loans but the bank was protected, they were selling the loans and getting them off the balance sheet. Thus they were protected since they made money on the transactions, got fees for servicing the loan, but the loan itself went to Wall Street.
Of course, they were exposing themselves in the back end by buying MBS from...Wall Street.
Who knows, maybe they bought pieces of their own loans back.
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The bank didnt get any TARP money so the Feds had to step in. The assets were sold (given) to TDBank, the deposits were covered by FDIC, the FED took the MBS (which are still likely on their balance sheet) and the shareholders like my buddy suffered a total loss of their stock.
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I have a friend who started a business like a year before the dot com bubble burst. Lost his business in a blink.
I'm glad he got back on his feet by teaching others to avoid his mistakes.
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Having all one's eggs in a basket makes it hard to survive when things turn negative.
It is sad to watch. Hopefully crypto will allow us spread things out a great deal more.
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