# Banks and rating agencies seemed to believe that large amounts of risk would disappear when many...

###### Question:

Banks and rating agencies seemed to believe that large amounts of risk would disappear when many risky loans were pooled together in collateralized debt obligations (CDOs). By 2006-2007 the error in this thinking became clear. What was the error and do you think it was intentional?

In his 2008 testimony to Congress former Fed Chairman Alan Greenspan admitted that he “found a flaw” in his ideology. What was his ideology and the flaw he identified?

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