According to the NY Times Citigroup executives weren’t concered about the 43 billion in subprime mortgages on their balance sheet because
“the probability of those mortgages defaulting was so tiny that they excluded them from their risk analysis”
One reason default seemed so unlikely was that “Citigroup’s risk models never accounted for the possibility of a national housing downturn.”
I wonder if their risk models accounted for the actual people borrowing the money. Take for example Alberto and Rosa Ramirez who apparently purchased a $720,000 house while making $15,000 per year picking strawberries.
Damn, those New York financiers are sharp when it comes to money. Financial capital of the world.