Why were CDO's allowed, and secondly, why is no one being arrested for marketing them

[RightofCenter]

Among economics experts it is well known that CDO's are at the root of the economic collapse in the US, if not the major cause...

1) What I want to know, is WHY were they allowed to be sold?

2) Secondly, why isn't the fact that they were *illegally upgraded from BBB risk, to AAA, and sold as a no risk investment being told to the now vulnerable American public? Why is it being hidden?


For those of you that aren't familar with the CDO, here is an Answers.com definition of it:

Collateralized Debt Obligation - CDO

An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often sub prime mortgages, loans, or debt.

Investopedia Says:
Similar in structure to a collateralized mortgage obligation (CMO) or collateralized bond obligation (CBO), CDOs are unique in that they represent different types of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as 'tranches' or 'slices'. Each slice has a different maturity and risk associated with it. The higher the risk, the more the CDO pays.

 

[NYcarbineer]

They became a problem because they weren't regulated and in the case of AIG they were sold by AIG with no ability, financially, for AIG to make payouts on them if need be.

 

[editec]

Among economics experts it is well known that CDO's are at the root of the economic collapse in the US, if not the major cause...

Agreed. and how refreshing to find someone who calls himself "RIGHT OF CENTER" who apparently understands that, too.

1) What I want to know, is WHY were they allowed to be sold?

That's the $64 TRILLION dollars question, isn't it?

the answer, if you believe Greenspan is "because I trusted the banks"

Is that pathetic or what?

2) Secondly, why isn't the fact that they were *illegally upgraded from BBB risk, to AAA, and sold as a no risk investment being told to the now vulnerable American public? Why is it being hidden?

Another EXCELLENT question? Why aren't Moodys and Standard and Poor's top executives hanging from the yard arms?

THEY made this mess POSSIBLE. Had they NOT graded this investments as safe NOBODY WOULD have bought them.


For those of you that aren't familar with the CDO, here is an Answers.com definition of it:

Collateralized Debt Obligation - CDO

An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often sub prime mortgages, loans, or debt.

Investopedia Says:
Similar in structure to a collateralized mortgage obligation (CMO) or collateralized bond obligation (CBO), CDOs are unique in that they represent different types of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as 'tranches' or 'slices'. Each slice has a different maturity and risk associated with it. The higher the risk, the more the CDO pays.

all I can say is this LEFT OF CENTER guy has been asking these same questions on this board and nobody ever picks up on it.

Perhaps your RIGHT on CENTER handle will evoke some of your fellow conservtives to start asking themselves these questions.

But frankly, I doubt it.

They'd have to know something REAL about what happened first, and they're so damned busy trying to blame the people who bought homes, they don't have time to ask the REAL questions that matter.

 

[RightofCenter]

evidently this is too complex of an concept for many to grasp...? Or what?

It shocks me that no one is concerned, talking about it, or aware of it.
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