They bought, among other things, Bear Stearns' portfolio as that company was going under; they also bought MBS, as you say, which were backed by Fannie and Freddie, and thus ultimately by the US Treasury. I don't know if you are implying they were therefore "sound" investments from your brief comment.
These securities are not insulated against price fluctuations due to interest rate changes, and are highly leveraged. They will at some point be under water, a fact that an audit will likely disclose.
Yeah, they made a couple of billion dollars by the time they liquidated that one.
These securities are not insulated against price fluctuations due to interest rate changes,
Who said anything about insulated? You claimed they were crap loans.
and are highly leveraged.
Can you explain this claim?
They will at some point be under water
Guaranteed bonds will be under water? What does that mean?
“they also bought MBS, as you say, which were backed by Fannie and Freddie, and thus ultimately by the US Treasury.”
For several decades prior to September 2008 Fannie and Freddie had been Fortune 500 companies listed on the NYSE. They ceased being government agencies back in the days of LBJ and Nixon.
I don’t think that there was any legal requirement for the Treasury to backstop them, stockholders and bondholders could have been left holding the bag. Backstopping them was a political decision made by Dubya and Paulson.