Interactive: CDOs’ Interlocking Ownership

September 22, 2010, 11:09 am

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<h1>Interactive: CDOs’ Interlocking Ownership</h1>
<p><strong>Oct. 20:</strong> This text has been <a href="#correx">corrected</a>.</p>
<p>As we reported last month with <a href="http://www.npr.org/blogs/money/">NPR’s Planet Money</a>, in the two years before the meltdown Wall Street bankers perpetrated one of the <a href="http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis">greatest episodes of self-dealing in financial history</a>. As part of our story, we wrote of 85 instances during 2006 and 2007 in which two <a href="http://marketplace.publicradio.org/display/web/2008/10/03/whiteboard_crisis_explainer_uncorking_cdos/">CDOs</a> bought pieces of each other. The trades enabled the completion of $107 billion worth of CDOs and underscore the extent to which the market lacked real buyers.</p>
<ul>
<li>Click on a CDO to see the other CDOs it swapped unsold pieces with.</li>
<li>Click on an underwriting bank, <a href="#cdo/327ep,1is7tg,3o4ga1,2u8luis,4omcj,1is7ti,2nt9,3o4g9z,3o4ga0,p3vs,j28j3,549a1qb,5iuo1ax,5iuo1ay,6j5mssd,p4wrxz,v3yych,bbrvc,35yqeu">for example Merrill Lynch</a>, to see which banks’ CDOs had cross-ownership. </li>
<li>Click on the <a href="#bank/">bank tab</a> to get a sense of how many instances of cross-ownership there were for any given bank. (<a href="#cdo/356w1p,bbsgw,327ep,1is7tg,pbea,5jswkpr,3o4ga1,9jl,qy,178yd,b43awlr,4gv087,3hmuyh,cr1kl,2u8luis,4omcj,1is7ti,1jldc0ta,2nt9,nikjyr,356w1e,356qoe,2qe0fjxh,d47v2,3o4g9z,3o4ga0,b8zd,k973l,3d,3m,2h,p3vs,5dtwa7z,jvpbsj,3fxu24,yfec4k,b43awlp,b43awlq,cm2lj,cqx2y,1kewxn3,86c6,mr4ft,ivhh3,j28j3,1xbmpc1,nuuzc1p,2e0ypxx,2uk060n,bls9zh,3s8ssgr,1ybz91,549a1qb,549a1qc,1j7epw03,5iuo1ax,5iuo1ay,1zl9pz,20p78l,7e22x,gcj8nrzc,fhrislh4,7zj8a,1odeh9wv,6j5mssd,6j5msse,8fvv1,8fvv2,8xrg8,p4wrxz,2iqye7,v3yych,30b1wi,356w1d,35jnyg,bbrvb,bbrvc,35yqeu,8sknuxv,zf4h0f,1jbso">Or see them all</a>.) </li>
</ul>
<p><strong>Related Post:</strong><a href="http://www.propublica.org/article/who-was-self-dealing-cdos">Which CDOs and Banks Had Deals With the Most Cross-ownership?<br />
</a></p>
<p><a href="http://propublica.s3.amazonaws.com/assets/cdo-connections/data.csv">Download the data</a> behind the chart.</p>
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 Source: Thetica Systems
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Series: The Wall Street Money Machine: As investors left the housing market in the run-up to the meltdown, Wall Street sliced up and repackaged troubled assets based on those shaky mortgages, often buying those new packages themselves. That created fake demand, hid the banks’ real exposure, increased their bonuses — and ultimately made the mortgage crisis worse.

Corrections

Sept. 22, 2010: This post previously reported that there were 85 instances during 2006 and 2007 in which two complex securities known as collateralized debt obligations bought pieces of each others’ “unsold” inventory. In fact, there were some instances when this cross-exposure occurred through later transactions. The banks sometimes used such transactions to minimize their own exposure to CDOs they had created.

Also, our interactive graphicincludes at least one example of cross-exposure that did not involve “unsold” inventory. A CDO called Tourmaline III made a sidebet in 2007 that mirrored the performance of a piece of a CDO called Zais Investment Grade 8; that same year Zais 8 bought a piece of Tourmaline III. Both CDOs were underwritten by Deutsche Bank.

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Jeff Larson was a reporter at ProPublica.

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Karen Weise was an intern at ProPublica and a recipient of the Mark Felt Scholarship for Investigative Reporting at UC Berkeley's Graduate School of Journalism.

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