A Devil's Dictionary of Finance

[bemildred]

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Additional Capital:

A financial lifesaver for banks and investment houses swamped by losses and the threat of bankruptcy. The additional capital raised to cover the emergency is obtained by printing and selling more stock, thus lessening the value of the stock already in existence.

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Blank Check Company:

A company with a pot of money and no business. First, you start a company. Second, you flush a covey of slap-happy investors who have lost the sense they were born with. After you have their money, you go looking for some kind of business for the company to get into. Compare a blank-checker with the men and women who tart up, go to the ATM to withdraw money and then head to a pickup bar. By the end of the evening some of them are in business. Most are not.

Collateralized Debt Obligation (CDO):

Take a bunch of commercial loans for which there is collateral of some kind or other, smoosh them together into one big loan or bond and voilà! You have a CDO. Whether you want the CDO depends on how good the underlying loans and collateral are. It appears that many of the investment bankers selling CDOs were too busy buying houses in the Hamptons to find out.

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Credit Default Swap:

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A credit default swap works this way: Company A gets a loan, usually in the form of a bond, from Company B, but Company B worries that Company A may not pay the loan when it comes due. So Company B makes a deal with Company C. In return for regular payments, Company C will make good any loses suffered by Company B in case Company A welches on the deal.

http://www.thenation.com/doc/20080602/howl