San Diego Daily Transcript executive editor George Chamberlin, previously criticized here for his dubious fact-checking skills, took a stab at the topic of Collateralized Debt Obligations (CDOs) last week. The result was less than exemplary. From his Friday “Money in the Morning” column:

Blame it on CDOs of ABS. That is the source of the problems that are rocking the stock and bond markets around the world. Unless you are a really serious trader you’ve probably never heard of Collateralized Debt Obligations of Asset-backed Securities, but that [sic] the source of all of the consternation these days. In particular, hedge funds that have made leveraged, highly speculative bets on the subprime mortgage market. It really has little to do with the underlying loans, but rather the technique used by traders.

I’m not sure you need to be a “really serious trader” to have heard of CDOs. I don’t even think you need to be a not-serious trader, or any kind of trader at all — just someone who reads the news. We at, along with many mainstream media outlets (including the Transcript itself!) have been writing about them for quite a while now. Heck, they’ve even been written about in that sophisticated news source read exclusively by serious financial professionals: USA Today.

The “serious trader” line is funny; the last sentence in the paragraph is just outright wrong. To begin with, I’m not sure who these traders are or what mysterious and unnamed “technique” they used to cause such a ruckus. Perhaps Chamberlin is grasping at the idea that the firms that securitized the risky loans vastly underestimated the odds that the loans would go into default. That was a function of the creation of these financial instruments, however, and had nothing to do with “trading techniques.”

Further, since the entire mess was kicked off when the underlying loans started going into default much faster than the securitizers had expected, it’s entirely incorrect to claim that “it has little to do with the underlying loans.” As a matter of fact, it has everything in the world to do with the underlying loans and, specifically, the fact that a significant number of them aren’t going to be paid back.

As it turns out, Chamberlin was just getting warmed up on Friday. Sunday’s North County Times featured a Chamberlin editorial that started off with this bit of unmitigated nonsense:

Let me begin by passing along my congratulations to the many people who are celebrating the current situation in the housing market. In concert with much of the national and local media, they have been able to artificially construct something that has never —- I repeat, never —- been done before: drive down housing prices at a time when unemployment is low, the economy is booming and consumer confidence is approaching record highs.


OK, let’s review the basics: it is an undeniable fact that the ongoing housing bust is a direct outcome of the enormous speculative housing mania that preceeded it. Home prices are falling because up until this latest bubble, home prices had never — I repeat, never — gotten so far out of line with local incomes and buyers had never — I repeat, never — taken on so much debt at such risky terms in order to get into the housing market.

Now, go re-read Chamberlin’s paragraph. He doesn’t even come close to identifying the actual cause of the housing market correction. Instead, he concocts an implausible tale about how the housing downturn was “artificially constructed” by some vast media conspiracy and, more misguided still, lays much of the blame with the group that is arguably the least responsible for any of this: the people who never participated in the housing bubble it to begin with!

The remainder of the article reverts to Chamberlin’s usual opportunistic conflating of local and national housing data along with yet another reprise of the oft-debunked “housing shortage” thesis. The actual cause of the real estate downturn is never mentioned — nor does Chamberlin explain how a few gloomy headlines or skeptical citizens could somehow single-handedly take down the housing market despite what he alleges are such fantastic fundamentals. Why bother with all that when you could just as easily fabricate a conspiracy theory that defies all evidence, logic, and common sense, and have your column get printed anyway?


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