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Reckless securitisation on top of reckless lending

Reckless lending practices spread from sub-prime to entire spectrum of mortgages—and securitization via RMBS and CDOs spread from banks to capital markets and investors in the US and abroad; increasing rather than reducing the global systemic risk.

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The Global Financial Crisis
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Pathology in the Credit Default Swaps market
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Reckless securitisation on top of reckless lending
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CDS market complex, unregulated and secretive
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Complex financial instruments that few understood
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Credit default swaps became divorced from underlying value
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Hedging/Netting contracts created web of vulnerability
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Monoline insurers struggling to meet guarantees
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Resources of regulators limited in comparsion to market players
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Speculative swaps grew to dwarf real insurance swaps
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Vast scale of rewards encouraged complicity with system
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