Thursday, February 7, 2008

Bankers losing hope in alchemy

"Bankers -- and the rating agencies -- believed in financial alchemy. They thought that financial innovations could somehow turn bad mortgages into good securities, meriting AAA ratings. . . . Worse, banks failed to understand the first principle of risk management: diversification only works when risks are not correlated . . . "

- Joseph E Stiglitz, Economist

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