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There was a pyramid scheme not because of the pyramid structuring of CDOs, which has nothing to do with Ponzi scheme, but because there may have been a bubble in CDO valuation ; Financial bubbles are when something is bought because of an expected increase in value may allow reselling at profit, and those may be described as Ponzi schemes.

The first link is wrong in its description of CDOs, BTW : the seniority of the upper tranches comes not because they are backed by safer securities, but because it is supposed they'll have to pay premiums only if all the backing debtors default, which is supposed to be very unlikely (and which may prove to be false in the case of subprime CDOs)

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Mon Aug 20th, 2007 at 05:39:33 AM EST
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