Over the past year or so, nothing has grown faster than demand for synthetic collateralized debt obligations. In the past several weeks, a drumbeat of warnings has emanated from the likes of the International Monetary Fund, Standard & Poor's, and a top official at the U.S. Federal Reserve.

Then, last week, on the heels of its dramatic downgrading of General Motors Corp. and Ford Motor Co. to junk status, S&P, which is generally considered the rating agency most skeptical of synthetic CDOs, downgraded several CDOs arranged by Deutsche Bank Securities - putting others on negative watch - because they were exposed to GM debt. The subsequent hair-trigger unwinding of some CDO positions showed how nervous CDO investors are these days. Merrill Lynch immediately issued a fixed-income strategy report saying: "We expect a rush to the door to be painful."

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