widespread ordinary fraud

Generic headlines and political rhetoric do not tell us how our economy crashed.

Tom Adams:

Back in April of this year, Yves Smith and I suggested that some of the responsibility for the widespread failure of CDOs might lie with CDO managers.

CDO managers were tasked with assembling the assets that went into CDOs and overseeing the transactions. While they failed miserably at creating successful deals, they have somehow managed to escape the wrath of the broader world. Large investment companies, such as TCW, Putnam, BlackRock and even Pimco, had assembled and managed CDOs backed by toxic mortgage bonds as had well-regarded banks such as Goldman, Merrill, UBS and Citibank.

Thanks in large part to the CDO managers own assertions of expertise, investors trusted in their ability to wisely select safe mortgage bonds while avoiding the increasing risks that were appearing in the mortgage market. By 2008 it was obvious that the faith that investors had in these highly skilled and highly paid managers was misguided.

After several months of analyzing the deals and participants in the market, I began to suspect that the CDO managers, had ample opportunity and motivation to knowingly or negligently contribute the collapse of the deals under their charge.

As jaded as I have now become, I must confess that I am still surprised at just how blatant and casual some of the thievery in the CDO market appears to have been.