I'm Moving

I'm fed up with being ignored so I'm moving to Butt Hole Road in Crapstone

I really don't expect anyone who can actually help to read all the way back to last summer and, the post below may not be clear enough ...
1. In order to be in compliance with SEC regulations, a privately issued MBS has to meet very specific structural requirements, one of which is that the issuer look like an actual corporate that has an equity like structure.
2. This equity class of the MBS is typically placed with institutional investors.
3. If no institutional investors can be found to purchase the equity, the Wall Street firm that executes the MBS transaction may be dumb enough to hold it itself.
4. Because the equity can not be rated - it is at the bottom of the cash flow chain - the issuer may employ a derivative strategy to artificially rate the equity.
5. The derivative turns out to be a credit default swap (CDS) which is issued by a credit worthy entity like AIG or Fannie Mae or Freddie Mac or Bear Stearns or Lehman or JP Morgan - shall I go on?
6. The CDS issuer uses a reference security having the same rating that the MBS equity needs.
7. The MBS equity holder (the actual issuer is a wholly owned subsidiary of some eleemosynary institution - I think?) employs leverage to finance the MBS equity.
This part I have to guess about:
8. The CDS referenced security is likely some private label MBS that was considered to be very unlikely to default, e.g. it possessed investment grade ratings. Further, it would seem that MBS issuers (I use issuer to really mean their sponsors - Bear & etc.) used the same referenced security - the size of the defaulted CDS' implies that.
9. Under the terms of the CDS contract, if the referenced security defaults, the CDS issuer is required to make a principal payment equal to the notional amount of the swap contract.
10. Like all insurance contracts, the issuer of the CDS contract is only required to keep a fraction of the notional amount of its outstanding contracts as capital.
11. When the referenced security defaulted, AIG and the rest were required to pay up - they lacked the necessary capital and the whole thing fell apart.

The point that I have been trying to make is, that if the referenced securities regain their investment grade ratings and if MBS holders can be assured that the ratings have a sound footing, the market should be restored.