The collapse of Brookstreet Securities and bailout of two Bear Stearns hedge funds have focused attention on collateralized mortgage obligations (CMOs). These recent CMO losses closely parallel CMO losses in 1994 when a significant increase in interest rates caused many bond mutual funds to fall in value far more than expected. Today’s CMO losses resulted from the relatively recent introduction of CMOs with substantial credit risk and the inadequate or misleading way in which that credit risk was disclosed. Dr. McCann provides a selective history and a brief description of CMOs.