 Quote:
Originally Posted by samclem
I'm not sure why you say this. The CDSs were key to keeping the whole game, at least on the private side, in operation. The CDS's facilitated the bundling of very risky mortgages into more marketable securities by allowing the risk of default to be sold (often to buyers who knew little about what they were getting)
|
This is simply not true. It was through the subordination of equity tranches that allowed large chucks of sub-prime mortgages to gain high ratings and, thus, marketability to the masses. CDS had nothing to do with it.
The CDS portfolios that have been problems (at AIG, Lehman, Bear, etc) were all written against corporate bond issues . . . and mostly investment grade issues at that. The government had nothing to do with any of this.
Free and completely unregulated markets screwed this one up all on their own (and then needed worldwide government intervention to save the free markets from their own excesses) - it does happen, you know?
|