Alternatively, the high-quality ABS is sold to structured investment vehicles which then issue AAA-rated debt to fund the purchase. SIVs even purchase highly rated debt from other SIVs in an astonishing chain of risk. High-quality ABSs are sold to hedge funds that leverage the AAA-rated assets (up to 20-30 times) via banks willing to lend against the value of the securities. Debt seems to buy more debt in a spiral of borrowing. At each level, banks charge fees and earn margins from money they lend.
