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View Diary: Euthanize Wall Street to save the economy (34 comments)

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  •  I'm too late to rec or tip (2+ / 0-)
    Recommended by:
    BYw, bfitzinAR

    and please repost at economicpopulist.org

    (both gjohnsit and I are doing so routinely now).

    I'll have to come back and re-read, this isn't a diary, it's half a book!

    A couple of quick hits about collateralized derivatives as packaged by Wall Street:

    1.  atomized risk is  systemic risk.
    1.  As Tanta over at CR demonstated a few weeks back, a rational customer deciding whether or not to buy a CDO would have to consider the expense of collecting on their slice of a default of any part of the risk -- and would quickly decide it wasn't economically feasible.  In other words, sliced and diced CDO's only work in a rising market.  Whodathunkit!

    Cheers.

    "When the going gets tough, the tough get 'too big to fail'."

    by New Deal democrat on Thu Apr 24, 2008 at 03:14:11 AM PDT

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