50% AND 5 CENTS

According to an article in the Financial Times, about 50% of the Free Market Fairy Dust has gone South:

Half of all CDOs of ABS failed
By Paul J Davies

Published: February 10 2009 19:38 Last updated: February 10 2009 19:38

Almost half of all the complex credit products ever built out of slices of other securitised bonds have now defaulted, according to analysts, and the proportion rises to more than two-thirds among deals created at the peak of the cycle.

The defaults have affected more than $300bn worth of these collateralised debt obligations, which were built from bits of other asset backed securities (ABS) such as mortgage bonds, other CDOs and structured bonds, or derivatives of any of these, according to analysts at Wachovia and Morgan Stanley.

A subsequent article reveals that some of that Dust went Deep South:

Insight: Time to expose those CDOs
Published: February 26 2009 16:34 Last updated: February 26 2009 16:34

JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDO’s, though, recovery rates on those AAA assets have been a mere 5 per cent.

Whenever someone starts defending MOTU pay, these numbers should be brought up.