CDO systemic risk debate rages

Nobody wants to scare people into thinking that Bear Stearns' troubled hedge funds is going to lead to a big market meltdown. But at least PIMCO's Bill Gross mentions that the Bear problems at least have rekindled memories of Long-Term Capital Management. Many shudder at the thought. You do have to wonder what is going at the Fed. You can bet they are monitoring all this very carefully. Not to get scary here, but there are some issues with the entire CDO market. Gross notes that they are all worth 100 cents to the dollar, that's how they're marked anyway--which is an issue. One pundit puts it starkly: "What about the dozens--many dozens--of other hedge funds and prime brokers out there with similar asset valuation and collateral margin issues festering behind the facade of mark-to-broker?" I think we can all agree that the coming wave of mortgage resets means the issue is not going away.  

For more:
- here's Gross's commentary  
- here's more commentary on the CDO market