And TCW kept shuffling junk into the CDO even as it became apparent that the whole subprime edifice was collapsing. This was apparent even to TCW, as Bloomberg makes clear:
While TCW was adding bonds made up of risky loans, its biggest mutual fund took a more ambivalent approach. TCW Total Return Bond Fund shrank its mortgage holdings not guaranteed by government-sponsored firms to 15.9 percent in July 2007 from 18.8 percent three months earlier, according to company filings.
Reporters Bob Ivry (a friend) and Jody Shenn also break some news here (UPDATE: I’m told the late Mark Pittman got a tagline that doesn’t show up on the Web. He was involved in starting the project):
The U.S. Securities and Exchange Commission is investigating how Wall Street banks bet against mortgage-linked securities to profit as their clients took losses, according to people familiar with the matter. As part of its examination of the market, the agency is looking at collateral replacement, said an SEC official with knowledge of the probe who asked not to be identified because he wasn’t authorized to comment.
Surely the bad guys are trembling now that the SEC is on the prowl!
Stories like this ought to stiffen what spine the SEC has left.