If that's not sarcasm, help me understand why... I'm not a finance guy. The argument made by the author was roughly something like this: - Capital requirements

If that's not sarcasm, help me understand why... I'm not a finance guy. The argument made by the author was roughly something like this: - Capital requirements against the CLO's assume AAA ratings - In 2008, we learned that AAA CDO traunches were really AAA (despite not containing a single AAA-rated loan) only when assumptions about (non-)correlation of defaults remained true -- ie real estate markets are local so not everyone defaults at the same time - The problem with the AAA CDO ratings was that in a time of crisis, all the "good times" defaulting correlation assumptions go out the window and everyone defaults together. Now the magic of blending a bunch of BBB's, BB's, and B's into an AAA no longer works. So if now we're repeating the same story -- a big shock ('rona) makes a whole bunch of previously uncorrelated loans default together -- then the argument goes that the capital requirements which assumed AAA ratings are insufficient. What part of that story is wrong or incomplete?