I enojoyed reading this blog posting – all of the complicated, involved CDS transactions and setups were intended to reduce, or even remove, risk from loss on the underlying asset. Well, the smart guys who thought them up got caught using them on a bet against subprime performing and were schooled by others. Unfortunately, it leaves them with a little less TARP money…
http://www.econbrowser.com/archives/2009/06/how_to_lose_on.html
Reminds me of that other book…The smartest guys in the room…I’m guessing you know waht that was about – Enron.
If we scratch a bit deeper into what happened in the mortgage market over the last 5 years, the guys at Enron would look like small-timers.