A bullet dodged. But what about the next one? The imploding of two Bear Stearns hedge funds did not lead to billions of dollars of exotic securities being dumped on the market, with the price falls and painful, widespread marking to market that might have followed.

The securities in question, CDOs, are leveraged vehicles that repackage loans such as subprime mortgages into securities. CDO securities are twice removed from the underlying mortgages, which is how, in the whacky world of modern financial engineering, you can end up with an AAA-rated tranche, which is actually constructed from lower rated asset-backed securities (ABS), partly backed, in turn, by the sort of subprime mortgages that are going belly-up all over the US in such spectacular fashion.