Rex Stores Corporation

Rex Stores' decline from appliance retailer to synthetic CDO holder exemplifies management distraction. The company operated 200+ appliance stores in small Midwestern towns. Management became obsessed with structured credit investments, eventually putting $300 million into subprime CDOs. When those investments collapsed in 2007, Rex had to close stores to cover losses. The company that should have focused on competing with Lowe's and Home Depot was destroyed by financial engineering.