The CDO swaps market is and was the main driver of the near economic collapse of the financial system. These products were nothing more than bets built on no assets whatsoever and as we know now some were designed to fail, pure gambling. Sub-prime mortgages by themselves were and are still only a small part of the mortgage market and only some of those failed. These swop derivatives were highly toxic and extremely high leverage vehicles and sold as triple A to what were supposedly sophisticated market players chasing yield in a poor yield environment because of very low interest rates. In truth the selling became so aggresive by morally corrupt and criminal Wallstreet firms that many pension funds and even municipalties looking for some yield got sucked in by Goldman and others and demonstrated they weren't too sophisticated after all, even Harvard funds advised by Rubin and Summers got the shaft.

Buffet and numerous others said all along these form of derivatives were like nuclear bombs but still Clinton and Bush deregulated advised by the so called best minds in finance, Rubin, Summers, Greenspan, Bernanke, Paulson and many Wallstreet bank Presidents and some not so best minds from the political side like Barney Frank and Chris Dodd by removing Glass Steagal and allowing lax regulatory supervision.

Add to this the total disaster of Fannie and Freddie, the failed GSE's (government sponsored enterprises), which were 100% politically motivated and poorly run by political appointees and money bagmen, and the fate of the US economic system will likely never be the same again especially if these same players are allowed to try and fix what they have wrought. I have little confidence in those who helped create the nasty problems to help solve them that makes as much sense as those who think that more debt can solve a debt problem, where do these politicians and people come from.

I'm still not convinced that lots of new regulations are needed as much as rolling back the clock by re-instating Glass Steagall, regulate derivative products, ban those derivative products not based on a real underlying asset, force derivatives to be exchange cleared, change how rating agencies are paid and regulated, increase capital requirement of banks and allow banks to fail using existing bankrupcy laws when they have poorly managed their business. The present regulatory laws are probably more than sufficent if the above changes are made and regulators learn once again how to regulate. But I doubt they will do what is right and will patch and impede the system and we will all be back here again in a few years.