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Haven't we been hearing about bad debt bringing down the economy since CoCo bonds were a thing like 5 years ago?
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I guess the central lesson from 2008 was "don't let the stock market crash." When you couple that to the president's inability to deconvolve "stock market" from "economy" it's a pretty toxic mix. The thing about CDOs that was entirely missed in 08 was that the risk is highly correlated, which completely undercut the argument that they weren't risky since a lone (no pun intended) default or two is diluted by the large number of loans represented in any given security. I can't, so far, figure out how CLOs are any different.