| fkusumot said: CDO's were not a result of of the Fed's mismanagement. The management of CDO's is handled by, surprise, no one. They are not regulated. Bad practices by the rating agencies are just a fact. Supposedly a bunch of B-Paper turned into a CDO magically got an investment grade rating. Are you saying they are regulated by the Fed? Are you prepared to discuss credit default swaps or credit derivatives that use CDOs as their reference entity? This started about this time LAST YEAR. That's when the housing bubble started popping and banks were taking big hits, and people were getting fired. There was plenty of time (compared to the 4-5 days Paulson has given us now) to do something. All of the major players understood that this debt was toxic. I'm pretty sure that all the B-Paper companies went out of business at that time. But all those loans are linked together by those CDOs. Which are in turn supposedly insured by the credit default swaps. |
The underlying capital in the CDOs are the sub-prime assets. Without the sub-prime assets, you do not have the sub-prime CDOs. The cause of the boom in sub-prime loans was the Fed's fault. Without its shockingly low interest rates, we would not have the toxic sub-prime debt. The Federal Reserve should be ashamed of the mess it has caused. I am not certain if actions can be taken against Bernanke and Greenspan, but they need to be held accountable for this.
