Which might have been the whole point behind the "share the risk" part of CDO's. You share the risk so that nobody loses money unless the whole system crashes, then count on the governments to bail the system out
Essentially a financial hostage situation
I really think the main reason no action has been taken so far to halt the rampant speculation by the likes of GS and MS is to allow them to recouple some of their subprime losses. Think about it. The feds allow them to be considered commercial buyers, so they don't have position limits. The Fed opens the discount window to them. They take that cheap, freshly printed money and then leverage it into futures contracts at eight percent margin. The money pours into their coffers like a torrent while they line up the suckers (such as pension funds) for when the regulations get put back into place.
So Fed policy is screwing us both coming and going. Our paychecks are getting devaluated by the cheap money the Fed is loaning to investment banks ... that they can use to drive up the price of oil and take a bite out of what is left of our paychecks.
Global consumers are bailing out the subprime mess a few dollars per head.
Oh, and wait until the margin calls hit the long-term index funds all those pension funds are holding. Can you say “poof?” Sure you can.