Credit Card CDO's ... ??
Not sure how true this is ... but here is what he wrote
SEVERE EDIT
CDOs aren’t just relegated to mortgages. For years, credit card companies have been generating debt and packaging them up as CDOs and selling them. Most people don’t understand how easily a CDO can be played by a credit card company. They can manufacturer debt out of basically thin air and then sell the CDO up or down the river depending on how you look at it.
Here is how easy it is to build a scam credit card CDO as explained with a great couple of paragraphs from the Mortgage Blues site. "Bubba applies for a credit card and gets one with a $300 credit limit at 10% interest. They charge Bubba $99 for issuing the card, $99 as an annual fee, and Bubba can actually buy one tank of gasoline without going over the limit. Bubba gets a bill, pays it immediately, and the payment gets processed one day after the due date. Bubba’s rate goes to 29.99%, he gets a $39 late fee, a $39 overlimit fee, and a bad attitude.
The bank, however, has a false $350 credit card asset, rolls it into an asset-backed security along with 100,000 other cards like Bubba’s, and sells $35 million as asset-backed securities. The problem is there are no assets to back the security. There is no collateral.
Recognizing that they have been scammed, twenty percent of the Bubba account holders don’t even send a second payment. After six months, 40% of the Bubba accounts quit paying. The rest pay off the account immediately and talk bad about the bank for the rest of their lives."
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