A great detailed analysis of how the financial markets got so screwed up:
An LSS, by contrast, made much the same trade, but didn’t have any prime brokers breathing down its neck. That’s because it borrowed the money to create its leverage by issuing asset-backed commercial paper, or ABCP. Investors would lend money at very short maturities – less than 90 days – against the assets of the LSS. And those investors had two reasons to be sure that they would get repaid in full. The first was that the assets of the LSS, being super-senior, were therefore super-safe. (That one didn’t work out so well.) The second was that the banks which created these structures, like Citigroup, promised that they would step up and buy the ABCP if no one else would. That is the famous liquidity put…
Read the whole thing.