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Friday, February 13, 2009


*If it were just 50% we would not be in this crisis. And if you think you are being informed of the full details, you are sadly mistaken. This article is only a fraction of the story. The key paragraph is about when the worst took place, at the peak of the credit bubble which is code for, housing bubble. So many were sold around the globe that you cannot even put your mind around it. And let's not forget, corporate CDO/ABS. But thats another story...

Half of all CDOs of ABS failed
By Paul J Davies

Almost half of all the complex credit products ever built out of slices of other securitised bonds have now defaulted, according to analysts, and the proportion rises to more than two-thirds among deals created at the peak of the cycle.

The defaults have affected more than $300bn worth of these collateralised debt obligations, which were built from bits of other asset backed securities (ABS) such as mortgage bonds, other CDOs and structured bonds, or derivatives of any of these, according to analysts at Wachovia and Morgan Stanley.

So-called CDOs of ABS caused huge losses to banks such as Merrill Lynch, UBS and Citigroup, which held large amounts of the supposedly safest, top-rated chunks of them. They have since been damned by bodies such as the Bank for International Settlements as being too complex to risk manage effectively.

CDOs of ABS were used increasingly at the peak of the credit bubble to keep the securitisation machine moving by recycling hard to sell bits of subprime mortgage bonds and other risky tranches into new structures with top-notch credit ratings.

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