[ken5050]

Unlike the S&L scandals, where properties were flipped several times.....the asset placed into the partnership was fraudulently scaled up only once......The auditors blew it..But the supposedly sophisticated bankers, who lent the billions to the partnerships with virtually no documentation, they really sold out, or displayed abysmal stupidity..at least the taxpayers, via the FDIC or FSLIC, won't get stuck for this one...

[GregoryFul]

..at least the taxpayers, via the FDIC or FSLIC, won't get stuck for this one..

Wanna bet?

[Bernard]

And there is another set of auditors that seemed to have missed this - the bank internal audit group, and the auditors tied to the regulatory agencies (Fed, Treasury, OCC, etc.) who rely on bank internal auditors to provide oversight on the details.

The entire audit profession took a major hit on this. Auditors have to maintain professional skepticism, and sometimes open the filing cabinet drawer to see if there really is a piece of paper with a customer's signature in there. (That refers to Penn Square, the Enron of the 60's or 70's). By the way, the firm that blew that one survived for a while, then got name-changed several times from one of the Big 8 to one of the Big 5.

And to address another poster's comments: the first rule of financial investments is Diversify, Diversify, Diversify. There are laws that allow companies to violate this basic principle, and guess who wrote those laws?