Collateralized Debt Obligations CDO

Collateralized debt obligations are created by repackaging bonds that in turn are created from home loans. Until the summer of 2007 these CDOs carried triple-A (AAA) ratings and were thought of as "super-safe" investments.

Super-senior holdings are the highest-rated of all CDO bonds. When the Global Financial Crisis (GFC) hit the marked these plunged as subprime-mortgage defaults surged causing many banks for post record losses.

Citigroup, for example, had to get a $45 billion taxpayer bailout in late 2008.