> Jake wrote: > Yes.. loose lending practices which gave loans those that could not afford > homes mortgages. >
Loose lending was part of the problem but it's such a small part. In another thread I detailed 3 core problems, but one I didn't mention is that this: If you read the other thread you know about packaging up loans into CDO bonds and then packaging up those bonds into their own "CDO2". I also talked about how you can insure those bonds with swaps, even is you don't own the swap. Thus 10,000 people can insure the same swap and 100% of the time I'm guessing the insurer didn't ask. What I didn't mention is that a swap looks just like a loan without the underlying asset. Each month a loan pays out a payment to the holder and each month a swap pays out a premium to the holder. So guess what else is out there? CDOs of swaps for which there is no underlying asset. In other words you can buy a bond based on swap, not owned by the swapper, which is againt bond based on bond which is a slice of another bond that is based on a loan. Oh, and you can get big fat loan with only 1.5% down to buy those bonds. Which is what, say, Lehman did. It's pretty simple, huh? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:281261 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
