Even without any further fall, a 40 percent decline in U.S. real house prices is a deep adjustment. This has led to a significant divergence among industries in the pace of recovery. Some industries are recovering much quicker than others.
Instead, they simply accepted investment-grade ratings as a substitute for their own risk analysis. Market participants may also have assumed that these vehicles had sufficient funding liquidity, or would receive bank liquidity support if funding became an issue. In observing these cases of insufficient due diligence, I am reminded of the old adage "Trust but verify."