SOTU: Schneiderman will co-chair mortgage probe (updated)

[applegrove]

7. There was an information vacuum in regards to sub-prime mortgages. Corporations

made millions based on the fact they knew the mortgages were crap and the people signing up for them or buying the packaged mortgages didn't know how bad it was. Used to be that you assumed your bank would be sure about whether you were a good candidate for a mortgage. That was the assumption many people out there were still working under. Bankers made millions in bonuses based on all the loan transactions they were able to make, the derivative transactions they were able to make, all based on a lack of good information their customers had.

That seems to be a new business meme: to make money off of people less informed than they are. The basic assumption under all economic models of markets is that given perfect information, demand and supply will find some healthy equilibrium. If the assumptions in the economic models is no longer correct, what does that mean for markets everywhere?