Monday, November 24, 2008

Yield pigs led to slaughter

(Citizen Grant nailed it a long time ago. - AM)

Nov. 25 (Bloomberg) -- James Grant, the vigilant editor of Grant’s Interest Rate Observer, is nothing if not prescient.

“The CDO machine,” he writes, “resembles some giant monetary snowblower, scattering dollar bills into the open hands of underwriters, investment banks, investment managers and rating agencies.”

What are CDOs, you ask? “Stacks of debts,” Grant says in his martini-dry voice. “Debts on the asset side of the balance sheet, debts on the liabilities side. They resemble banks without walls -- or depositors or regulators.”
And who, by the way, buys asset-backed securities? “Yield pigs,” Grant replies.

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