Bokelskere.no

The key to this financial alchemy was that there could be thousands of miles between the mortgage borrowers in Detroit and the people who ended up receiving their interest payments. The risk was spread across the globe from American state pension funds to public health networks in Australia and even to town councils beyond the Arctic Circle. In Norway, for example, the municipalities of Rana, Hemnes, Hattfjelldal and Narvik invested some $120 million of their taxpayers’ money in CDOs secured on American subprime mortgages. At the time, the sellers of these ‘structured products’ boasted that securitization was having the effect of allocating risk ‘to those best able to bear it’. Only later did it turn out that risk was being allocated to those least able to understand it.