The Question and Answer Board

[Ecomike]

They were CDOs not CDS. Collateralized Debt Obligations. Lehman's Brothers invented them. They had a 10X leverage and they bankrupted the largest insurance firm in the world, AIG in the default, because the banks also added 10X leverage, using them as assets to print and loan out 10x more money than the assets are listed as being worth. Because they packaged high risk loans with AA/AAA rated loans, there was no way to value the CDO's the banks held, once the market figured it out.

It was the MBOs fault, it was 100% Lehman's brothers and Congress, and the US Government, top to bottom, asleep at the wheel trusting the market. Just like in 1929. You are right, it was not Fannie Mae's fault.