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in very risky credit linked notes (CLNs). The risk is linked to leveraged structured products including subprime and other mortgage loan debt. Some are also linked to corporate leveraged loans (private equity buyout debt and other debt).The credit linked notes employ credit derivatives technology. [This is related to my comments about super senior mark-to-market manipulation. Many firms put leveraged super senior linked notes (CLNs) in the conduits to avoid the unpleasantness of marking them to market.] . . . Investors can be left holding the bag, because entities that provide the liquidity facilities sometimes refuse to buy the paper based on “technicalities (foreseen technicalities).” Nice kids. I call this the “Wiffelwaferdooper Exception.” It appears in many forms in many documents. This is what seems to be happening right now in Canada.

27 “Bracing for Regulation,” CNBC, 13 August 2007. Segment with Steve Forbes, Janet Tavakoli, Carl Quintanilla, and Eugene Ludwig,

28 Becky Quick, “Buffett Eyes Countrywide,” CNBC, 21 August 2007.

29 Katherine Graham, Personal History (New York: Random House, 1997), 534.

30 Harlan Levy, “The Finger Is Pointing toward the Underwriters,” Journal Inquirer (Connecticut), 9 October 2007.

31 E. Scott Reckard, “Countrywide Financial Chairman Angelo Mozilo’s e-mail sets off a furor,” Los Angeles Times, 21 May 2008.

32 James R. Hagerty, “Rainmaker Mozilo Exits under a Cloud,” Wall Street Journal, 28 June 2008.

33 David Wighton, “Reputations to Restore at Unforgiving Merrill,” Financial Times, 10 October 2007.

34 Janet Tavakoli, “Subprime Mortgages: The Predator’s Fall,” GARP Risk Review, no. 35 (March-April 2007). This article was published on April 13, 2007. I wrote the original draft in February 2007.

35 “Inside Merrill Lynch,” Squawk Box, CNBC, 24 October 2008. Segment with Janet Tavakoli, Joe Kernan, Jack Welch, and Charlie Gasparino,

36 Stan O’Neal, “Risky Business,” Wall Street Journal, 24 April 2003.

37 “More than 400 Defendants Charged for Roles in Mortgage Fraud Schemes as Part of Operation ‘Malicious Mortgage’ Federal Bureau of Investigation Press Release,Washington, 19 June 2008.

38 Ruth Simon, “Countrywide’s Pressures Mount,” Wall Street Journal, 26 June 2008.

39 Andrew Harris, “Countrywide Sued by Florida Over ‘Deceptive’ Loans,” Bloomberg News, 1 July 2008.

40 Illinois Attorney General Lisa Madigan made these comments when Tom Hudson interviewed her for a segment, “Countrywide in the Crosshairs,” on First Business Morning News, which aired June 25, 2008.

41 Ruth Simon, “Countrywide’s Pressures Mount,” Wall Street Journal, 26 June 2008.

42 Damian Paletta and David Enrich,” Crisis Deepens as Big Bank Fails,” Wall Street Journal, 12 July 2008. Senator Charles Schumer (D. N.Y.) had written to the Office of Thrift Supervision about IndyMac’s solvency and depositors withdrew around $1.3 billion in following 11 days.The largest two bank failures before 2008 were Continental Illinois National Bank and Trust (Chicago) in 1984; it had $40 billion in assets, and First Republic Bank (Dallas) in 1988; it had $32.5 billion in assets.

43 Michelle A. Danis and Anthony Pennington-Cross, “The Delinquency of Subprime Mortgages,” Federal Reserve Bank of St. Louis (Working Paper 2005-022A), March 2005, 15.

44 AP New York,“S&P: Subprime delinquencies continue to climb,” 22 May 2008.

45 James Tyson, “Fannie, Freddie Surplus Capital Requirement Is Eased,” Bloomberg News, 19 March 2008.

46 James R. Hagerty, Ruth Simon, and Damian Paletta, “U.S. Seizes Mortgage Giants,” Wall Street Journal, 8 September 2008.

47 Dan Levy, “U.S. Foreclosures Hit Record in August as Housing Prices Fell,” Bloomberg News, 12 September 2008.

48 Gretchen Morgenson and Charles Duhigg, “Loan Giant Overstated the Size of Its Capital Base,” NewYork Times, 7 September 2008.

49 Caroline Baum, “No Limit to Greenspan’s Once-In-A-Century Events: Caroline Baum,” Bloomberg News, 18 August, 2008.

50 Berkshire Hathaway 1999 Annual Report. 15.

51 Berkshire Hathaway 2000 Annual Report. 12.

52 Berkshire Hathaway 2003