Grant's Interest Rate Observer on the fragility of the CDO market (2007)

We are the first to admit our shortcomings in knowledge about structured mortage finance. But, then, we have found - colleague Dan Gertner, our man on the case, can attest to it - that ignorance about CDOs and ABS is far-reaching. In fact, it reaches far into the population of CDO investors. A subscriber who has made a study of the subprime market - he is a long-short equity investor by trade - e-mails to share his observation that "somewhere in the neighborhood of 70% of CDO buyers rely almost entirely on the ratings because they don't have the time or expertise to evaluate the underlying collateral and structure." It follows, our reader points out, that "once the rating agency integrity is gone, so is the CDO market, it would seem."

~ Grant's Interest Rate Observer, "Wheezing CDO machine," March 9, 2007