Does Lynton Jones even know what a hybrid ABS CDO is?

There is a mind-bogglingly deceptive report issued by the City of London blaming the crisis on "over leveraged" ABS CDOs and claiming that this is evidence that credit default swaps did not lie at the heart of the crisis. This is a ridiculous point of view. Credit default swaps were the tool used by ABS CDOs to become over leveraged. While it is possible to argue that certain categories of credit default swaps are not subject to abuse (e.g. that this was a problem of index CDS and that single-name CDS are inherently safer products) or that some targeted forms of regulation are sufficient to address the problem, it is dumbfounding for someone to claim that the crisis was caused by CDOs and not by the credit default swaps they used to become overleveraged.

The confusion created by this misleading report has already led the FT to publish a commentary by someone who clearly does not understand how ABS CDOs were structured because he claims based on the City of London report: "Let’s start with the simple proposition, which seems to be almost universally accepted, that the OTC markets in credit derivatives were one of the main causes of the crisis. The City of London report utterly refutes this claim."