The Story of the CDO Market Meltdown
A year ago, a paper written by a student at Harvard College -- Anna Katherine Barnett-Hart -- received a fair amount of media attention. The paper examines the collateral performance and credit rating of asset-backed security collateralized debt obligations, so-called ABS CDOs. The author's findings are not surprising, in light of what is already known about the mortgage meltdown, but they do provide a better delineation of the parameters of the CDO meltdown. Given the intense interest in CDO deals following the Securities and Exchange Commission's charges of civil fraud against Goldman Sachs for a deal known as Abacus 2007 AC1, it is worth revisiting the findings in this research and analysis by a college senior seeking to graduate with honors. The author looks at both broad data on CDO performance and the ratings of credit rating agencies, but she also closely examines 735 ABS CDO deals. The author's main finding is that there was far too much in the way of low qual...