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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (68839)	8/25/2006 1:44:02 PM
From: Ramsey Su	Read Replies (1) \| Respond to of 110194

In theory, the MBS holders are protected by the repurchase reserves of the issuers. Furthermore, I was also told that there are all kinds of exotic credit default derivatives that reduce the risk, therefore allowing the spread to be so tight. I have been trying to find out who are selling this "default insurance" and I have always been told they are the large hedge funds. Yet, none can name any of these large hedge funds. My concern obviously is a LTCM style melt down. If they are severely leveraged, these defaults are going to be very costly to someone. Are these counter parties prepared to pay up?