by Calculated Risk on 7/11/2007 01:49:00 PM

From Reuters: U.S. FDIC chief looking at banks' CDO exposure (hat tip dotcommunist)

The Federal Deposit Insurance Corp. is looking "very carefully" at banks' exposure to collateralized debt obligations (CDOs) tied to subprime mortgages and whether rising default rates may creep into higher-rated CDO tranches.

"We're going to see more downgrades," FDIC Chairman Sheila Bair said on Wednesday, referring to a slew of CDO downgrades announced on Tuesday by two major credit rating agencies.
...
"I think the question is, to what extent is this going to creep into the higher-rated tranches. Most of these securitizations are over-collateralized but giving rising default rates and the fact that a lot of these loans haven't reset yet, it could creep into the higher-rated tranches," Bair said after addressing a Washington meeting of the New York Bankers Association.

"We're certainly looking at CDO exposures (of banks) very carefully and monitoring whether they could creep into higher-rated tranches," Bair said.

Did someone forget to send Bair the "contained" talking point memo?