CDOs

The crazy financial web of webs

Here's a combination of resources from the world of Public Radio that I recommend if you want to really dig into some of this huge financial mess that we are in.

First, listen to This American Life's episode #355, The Giant Pool of Money. This episode explains why there was such an appetite for a safe-yet-profitable investment, and how the American housing market came to be seen as that market when the U.S. Treasuries refused to be. Then it follows that appetite from the super-huge institutional investors to the merely huge institutional investor all the way down to the guy brokering the loans in Scranton and Tuscaloosa.

Okay, second, switch your loyalties to Marketplace, where Senior Editor Paddy Hirsch has made the video below about how Collateralized Debt Obligations work. What I like about this video is that he explains how investors made CDOs of CDOs, and therein lay the problem.

Crisis explainer: Uncorking CDOs from Marketplace on Vimeo.

You may remember that I took a crack at explaining these things back in December. This video is better.

There's two more things you need to see: click Read More!

Lies your mortgage company tells you (when you go to meet with them en masse)

So you've led an angry crowd of homeowners to the doorstep of a mortgage company demanding LOAN MODIFICATIONS NOW that freeze your loans at their teaser rates forever. He says, "No can do. I'm legally bound by investors in the secondary market."

Is that true? It might not be. I don't 100% get it, but I might have made some progress today. Wanna see what I think I found? I know you do. Come along!

Harold Brubaker wrote a pretty good analysis of Collaterallized Debt Obligations today in The Inquirer, which are the means by which many mortgage holders have spread around the risk of sub-prime mortgages. I say "pretty good" because I read it three times today before I started getting my head around it. Then I went to Wikipedia and read about the darn things there.

Let me try to put it my way (which might also be wrong, but what the heck), and, more importantly, point out that these things don't work quite the way that the mortgage industry has described. In other words, a teaser freezer seems much more legally feasible than the Greedniks care to admit.

I got your clarity right here: click read more now!

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