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CDOs weren't a full-Ponzi, but there was more than a hint of Ponzi about them.

I'm guessing the first few iterations of the high-risk tranches would have posted impressive returns, and this would have been enough to persuade hedge funds to funnel money at them, starting a mini-Ponzi stampede, which would in turn have made CDOs as a whole look more attractive - especially with unrealistic risk ratings.

All it's going to take is proof that someone somewhere moved money from Tranche A to pay off a high return on Tranche B in the hope that money would come in to cover Tranche A at some point, sooner or later, and you have a classic Ponzi.

I'll be surprised if no one tried this.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Aug 20th, 2007 at 07:49:58 AM EST
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