To: Kevin Rose who wrote (139331 ) 9/29/2008 7:44:33 PM From: geode00 Respond to Over a year ago:It has become clear that such a fire sale would yield meagre returns, even if enough buyers could be found for the toxic investments. These investments are called collateralised debt obligations (CDOs), financial instruments created and sold by Wall Street banks who package together and then carve up large numbers of sub-prime mortgages and other loans. The possibility has terrified Wall Street because it is unknown exactly where the ownership of CDOs might be concentrated. Many hedge funds own parcels of CDOs, as do the trading desks of most of the big investment banking firms, but their ownership has also been spreading in the past two years to include mutual funds, pension funds and universities.Bear Stearns was pushing the view yesterday that CDO values are actually artificially depressed because of the crisis at its two funds, but other investors - particularly hedge funds who have been betting on a fall in CDO values - have warned that the market may be being artificially propped up. A group of hedge funds led by Paulson & Co asked the Securities & Exchange Commission last week to examine whether banks were doing deals to buy back CDOs at values above the market price so as not to have to admit that other CDOs in their portfolio had gone down in value.
