CDOs (collateralized debt obligations) and repos (repurchase agreements) make up what economists call the "Shadow Banking System." This system allowed banks to become over-leveraged and overly-interconnected. Thus, when the collateral in the CDOs -- in 2008, these were typically based in real-estate -- began to devalue, nearly every bank and financial institution imploded. It's fascinating stuff.
CDOs (collateralized debt obligations) and repos (repurchase agreements) make up what economists call the "Shadow Banking System." This system allowed banks to become over-leveraged and overly-interconnected. Thus, when the collateral in the CDOs -- in 2008, these were typically based in real-estate -- began to devalue, nearly every bank and financial institution imploded. It's fascinating stuff.
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