What the video doesn’t talk about are Credit Default Swaps – which was what really took down the market. It is a highly leveraged product which really is an insurance product but is regulated like an investment product. If you are on the ‘cover’ side of a CDS, you are obligated for any losses that occur on which loan or loan bundle you are covering. CDS(s) took down Bear Stearns, almost took down Goldman, Lehman etc.
CDOs may be a problem, but CDS(s) are toxic — and they are still not regulated as an insurance product.
