Yesterday, Fortune published an enlightening view into the machinations of the subprime mortgage crisis (Wall Street's money machine breaks down). The article pretty simply lays out a classic case of how Wall Street (from the CEOs offices to the ratings agencies) let greed loosen their grip on reality and rode the subprime wave straight to financial hell. The extent of the exposures and potential losses that some of the biggest financial services companies in the world are facing is mind boggling. Merrill, for example, still has $21 billion in unhedged exposure to subprime bonds. Merrill's current writedowns are $7.9 billion with more to come.
This brings me to a couple of fundamental questions. How is it that these guys aren't in jail? I thought SOX was supposed to mean greater financial transparency and lower risk. Second, why isn't more being done for the real victims in all of this -- the borrowers, most of whom didn't really know what they were getting into?