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Crisis explainer: Uncorking CDOs
Marketplace Senior Editor Paddy Hirsch gives a bubbly explanation of the intricacies of "collateralized debt obligations" -- those financial instruments that got us into this financial mess.
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John Creighton says "The causality is also wrong. The top tranche doesn't get filled up first because it is the least risky. It is the least risky because it gets filled up first. Good video though" They get filled up first b/c they are less risky. They are less risky because they are filled with the "safe mortgages", you know,30 year fixed, etc. The bottom tranche is filled with I/O loans, arms and the such. Making them more risky since when the payments reset the homeowner will probably fall into default. Anyway, this is an excellent explanation. If you don't understand it then go back and watch it again. It's actually quite simple. Crazy. But quite simple to understand.
This was really really good...but I hate to break it to all of you who want to stick it to the managers who did this, but the folks who started this mess were your representatives and senators that reduced the capital requirements on Freddie and Fannie for obvious reasons. And three of the biggest receivers/supporters had the last names Frank, Dodd, and Obama.
Somehow, someway, these people have to be tracked down, sent to jail, all money, all salaries and bonuses returned. It has got to be done.
I am so pissed off.
This story needs to be front page news all over the world.
I am ready to start a lynch mob, now.
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