I think you nicely answered your own question! One would imagine that capital regulations would provide a convenient expert view of the (in my view artificial) distinction. To cut and shut distressed debt into shiny products is surely the différance where this all falls apart.
Reads like AIG all over again.
That is the obvious next step... for now no systemically important financial institution has written credit protection insurance on any of these tranches, but it's only a matter of time!
@marcomarcos started
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I think you nicely answered your own question! One would imagine that capital regulations would provide a convenient expert view of the (in my view artificial) distinction. To cut and shut distressed debt into shiny products is surely the différance where this all falls apart.