This video explains well how CDOs and CDS's operate and how we have got into the current mess.
The problem with this video is that it incorrectly shows how the fed operates. The video shows the fed setting T-bill rates at 1%, the fed doesn't do this. The fed sets a target rate(this is the rate people typically call the fed rate, it is technically called the "open market target rate") for controlling what banks lend to each other, this was the 1% rate.T-bills have been around between 2-4% for the past few years.(Today, the 26th of February, they are 2.99%) The target rate is also not the rate the fed lends to banks, this rate is called the discount window, and it usually stays about .75% above the fed rate.
Submitted by Bill (not verified) on February 27, 2009.
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