Financial Crisis Redux ?

In the 2008 Great Financial Crisis, Wall Street brought the Global economy to its knees by selling massive amounts of mortgage backed securities, which turned out to be nearly worthless.

The Financial Engineers packaged “collateralized debt obligations” ( CDOs ) each representing thousands of bad subprime mortgages, and were able to get rating agencies like Moody’s to give the CDOs an “A” rating. Many such investments were sold to retail customers who were left holding the bag when these securities cratered in value.

In essence, Wall Street was able to transfer the risk of the subprime mortgages to CDO investors.

Wall Street is back at it now, offloading private credit funds ( which are facing massive losses and customer redemptions ) in the form of a “bond” targeting an A rating from Moody’s. These new “bond “ investments, called “collateralized fund obligations” ( CFOs) and are being pitched by Financial Advisors to retail customers as "safe and secure” fixed income investments.

Recent estimates are that $1 trillion to $1.75 trillion of CFOs and similar structures are being sold to institutional and retail investors.

If there is an economic downturn, private credit funds could go south, just like the 2008 subprime mortgages did. At that point, the CFOs will likely meet the same disastrous fate as the 2008 CDOs.

Investors should contact an investment fraud lawyer to determine if their “bonds"  are really bad private credit investments that their brokerages have dumped on them.