On April 7 and again on April 21, the Fed added another $50 billion each through its Term Auction Facility. The Fed was lifting heaven and earth in an attempt to keep the financial system from disappearing down the drain in a humongous swirly.
Lest you think Wall Street learned a lesson from this historic meltdown of the financial markets there is new risky-business afoot. If your recall of 2007 and 2008 is fuzzy – heed this reminder.
Back then, financiers peddled tranches of collateralized debt obligations (CDOs) – basically high-risk (junk) home mortgages that had been packaged up and sold as ‘safe’ investments. These were the toxic securities that I alluded-to in one of my earlier posts.
Nowadays, financiers are peddling tranches of collateralized loan obligations (CLOs) – basically high-risk (junk) corporate loans that have been packaged and sold as ‘safe’ investments.
There’s trillions of dollars of this stuff floating-around out there. And a short opinion piece from the New York Times sums-it-up nicely….
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