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>But the actual problem was that those loans were being rated AAA when repackaged into a CDO. I was under the impression that the CDO as a whole was being rate
by elhudy 8y ago
>But the actual problem was that those loans were being rated AAA when repackaged into a CDO.
I was under the impression that the CDO as a whole was being rated well - and the junk loans still maintained their rating when they were packaged. In other words, both parties were aware that the highly rated CDO contained bad loans. Is this not the case?
- debt 8y agoThe junk stuff was repackaged many times over and sold as separate financial products. That was where the whole rocket scientist quant bs came in as it required made-up math to make it work. So it was re-rated from crap to AAA. And then AIG started offering insurance against those products and things really started heating up. So it took taking some good bonds and some bad bonds and throwing them into the same CDO to get a good rating.