Banks, hedge funds, insurers face trouble from synthetic CDOs

Banks, insurers and hedge funds that used synthetic collateralized-debt obligations could face further writedowns because many of the complex investments contain considerable exposure to financial institutions that have collapsed, such as Lehman Brothers. KBC, a Belgian bank, recently announced a $2.15 billion writedown on its portfolio of synthetic CDOs after some of deals held in the portfolio were downgraded by Moody's Investors Service.

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