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The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy

Book by Yanis Varoufakis · 1 quotes · Cdo, Wall Street, 2008 Financial Crisis

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The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy Quotes

“The CDOs that sliced up and then spliced together disparate debts belonging to a heterogeneous multitude of families and businesses were put together on the basis of certain formulae, whose purpose was, supposedly, to calculate their value and their riskiness. These formulae were developed by financial engineers working for Wall Street (e.g. for J. P. Morgan, Bank of America, Goldman Sachs, etc.). To render the formulae solvable, certain assumptions had to be made. First and foremost was the assumption that the probability that one slice of debt within a CDO would go bad was largely unrelated to the probability of a similar default by the other slices in the same CDO. That is, it was assumed that what happened in 2007–08 was…impossible! That it was unnecessary to factor in the possibility of some crisis, during which Bob lost his house for reasons that increased the chances that Jane would lose her job and eventually also default on her mortgage.”

Wall StreetNeoclassical Economics2008 Financial CrisisCdo
Book:The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy
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