The buying and selling of CDOs: Whose fault is it?

Got this from BaselineScenario (post entitled How To Sell Toxic Waste), and was originally taken from ZeroHedge blog.  I thought it was interesting.  The post basically showed another victim of allegedly safe investments, the Kenosha Unified School District, which invested as much as $200 million of funds to Stifel Nicolaus, which was once selling “riskless” synthetic CDOs. Now the firm is facing a lawsuit from the school district.  What I liked more about the post (perhaps unnecessarily so) were statements given by people from Stifel Nicolaus about the investment:

  • “These are safe AA/AAA type investments.”
  • “It’s a AA rated investment [and . . .] meets statute prior to new rules that allow you to invest in anything, so we’re staying on the conservative side.”
  • “It takes 20 out of these 100 companies to default before it gets to your AA level.”
  • “There would need to be 15 Enrons before you would be impacted.”

Below is the presentation given by Stifel to the victim (again thanks to ZeroHedge):

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