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CDO or collateralized debt obligation bunch up junk loans into "good investments" via a layer of obfuscation and complicit ratings agencies CDS or credit default swaps are like insurance for CDOs

AIG sold a lot of CDS by giving big bonuses to employees who sold them. the employees were just glorified insurance salesmen

Goldman would sell CDOs promising big safe returns while also betting against them by buying insurance from AIG to profit when they failed they also purchased insurance on AIG failing b/c they saw how stupid AIG was being and was worried about AIG not being able to pay out

eventually, the lendees couldn't pay their home loans the CDOs consisted of mostly people who couldn't pay back the loan. you could take their house, but b/c this happened all at once the housing prices crashed too. CDOs became worthless

those who bought the CDS insurance now wanted payouts. AIG predictably died. (though the executives and the insurance salesmen got their bonuses despite losing their jobs)

rememer how goldman bought insurance? well... the guy in charge of handling the financial crisis was a former ceo of goldman and and forced aig to payout goldman before dying (goldman & michael burry basically did the same buy CDS bc they saw CDOs as crap strategy)

the idiot banks like AIG, Bear Stearns, Lehman Bros, Fannie Mae, and Freddie Mac were basically eaten by the not-so-idiot banks (w/ some inside help) so now there are few but larger banks

the previous crisis was at its heart handing out loans to to people who wanted to buy HOUSES but wouldn't be able to afford them some suspect that the current crisis is due to handing out loans to BUSINESSES that won't be able to return them