Has The Outsourcing Of Financial Technology Systems Contributed To The Financial Services Industry Crisis?
Posted by
China Sourcing Commentator
Aug
13
Some experts are saying that flexible and robust financial business intelligence systems would have been able to alert upper level management of impending problems. Wall Street’s infatuation with outsourcing led it to save a lot of IT dollars and lose its ability to build new IT systems for new financial environments. Dumb move.
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No, the problems with the market have to do with subprime mortages, how the debts were bundled and sold on Wall St. The SEC, the goverment and Wall St lowered the standards for borrowing on homes. In the past you needed 20% down, and prove you had enought income. The goverment allowed the standard to be lower to make it easier for poorer people to buy homes. Wall St then came up with new ideas on how to bundle the debts and sell them. People then bought the debt not knowing the underlieing financials.
My personal opinion would be that this would have little to do with today’s situation. At the end of the day it was pure greed. The primary driver of the crisis is that financial institutions were willing to gamble on very risky mortgage backed securities which flooded the market with mortgage companies which would loan crazy amounts of money to people who were overextending themselves to get into home which were out of their financial reach previously. With Wall Street firms willing to make a market for these securities and hold them on their books hoping to make a foturne, this drove the real estate market to overinflate. Many of the loans were veriable or fixed for a short term then converting to variable, so when these people who were able to get into a home with a $2000 mortgage all of the sudden got hit with a $3000 mortgage they began to default. It was then just a domino effect from there. People began to forclose, which drove the housing market down….and here we are.
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I don’t buy your theory. I think these investments made by the Fin Serv Cos were crap and they didn’t need no computer report to tell them. They failed to have adequate diversity in their own investments and burned themselves.