Wall Street Redux: Arcane Names Hiding Big Risk

nyt thursday

http://www.nytimes.com/2013/04/19/b...ky-loans-and-mortgages.html?pagewanted=1&_r=1

The alchemists of Wall Street are at it again.

The banks that created risky amalgams of mortgages and loans during the boom — the kind that went so wrong during the bust — are busily reviving the same types of investments that many thought were gone for good. Once more, arcane-sounding financial products like collaterized debt obligations are being minted on Wall Street.

The revival partly reflects the same investor optimism that has lifted the stock market to new heights. With the real estate market and the economy improving, another financial crisis seems a distant prospect. What’s more, at a time when the Federal Reserve has pushed interest rates close to zero, the safest of these new investments offer interest rates almost double that paid by ultrasafe United States Treasury securities, according to RBS Securities, which was involved in such instruments in the past.

But the revival also underscores how these investments, known as structured financial products, have largely escaped new regulations that were supposed to prevent a repeat of the last financial crisis.

Banks are turning out some types of structured products as fast or faster than they did before the bottom fell out. So far this year, for instance, banks have issued $33.5 billion in bonds backed by commercial mortgages, slightly more than they did in early 2005, when the real estate market was flying high, according to data from Thomson Reuters.

Click to expand...

this administration has totally caved to TBTF, too big to fail

much (to the tune of trillions) of the action taken by this administration has only served to bail out and prop up the greatest (in magnitude) of our private corporations

because...

well, let's let eric holder say it, 6 weeks ago

Holder: Banks May Be Too Large to Prosecute - Washington Wire - WSJ

here's where ows (occupy wall street) and tea partiers overlap (even if the latter do tend to clean up after themselves)

this administration has institutionalized the socialization of big business losses while privatizing its gains

the grey lady presents the perfect picture of it

it's also where rand son of ron fits like a glove

who would also, by the way, if not wish you a happy 4-20, at least he'd leave you alone

as of today, notes the times, 34% of outstanding money in commercial mortgage backed securities is in interest-only loans

3+ trillion of qe by the fed, essentially buying junk

interest rates kept near zero forever

how much hot air can a balloon take?

the least problematic structured loan in 08---collateralized loan obligations---involve pools of loans advanced to companies with junk ratings

q1 of '13 saw more loans of this nature processed than q1 of 07

the fed released guidance last month warning that "prudent underwriting practices have deteriorated"

let the lady leave off on a lift:

bank profits from securitizations are +68% in 2012

So whatever happened to Occupy Wallstreet? You know, the thousands of people who were protesting exactly this type of thing?

And remember when the Tea party was a bunch of common people with unfocused anger at fiscal excess and stupid bull**** like this? Pity they were suborned by Koch propaganda. Nowadays, all the Tea Party seems to stand for is 1) ignorant redneck bible thumping, 2) pulling the country into recession at all costs, and 3) fighting to the death to prevent any sort of financial regulation.

Oh, and **** Obama for not being liberal enough to call for regulating the financial industry.

suborned: 'Occupy Wall Street' Consumed by Crime Wave/Yahoo!

top 1%: QE4 Is Here: Bernanke Delivers $85B-A-Month - Forbes

regulation: Fannie and Freddie Exempt From Dodd-Frank | NBC News

crime: Holder: Banks May Be Too Large to Prosecute - Washington Wire - WSJ

a good start: Rand Paul: Audit the Fed - POLITICO.com

Considering that the GOP has blocked all attempts to regulate wall street, then it is far from solely Obama's fault.. although he has not exactly put pressure on to get regulation and transparency on Wall Street as he should. Just look at what happened to the CFPB...

PeteEU said:

Considering that the GOP has blocked all attempts to regulate wall street, then it is far from solely Obama's fault.. although he has not exactly put pressure on to get regulation and transparency on Wall Street as he should. Just look at what happened to the CFPB...

Click to expand...

I think there is a lot of misunderstanding and down right "blame" gaming going on. Current problems cannot be totally laid at Obama's feet no more than the "Meltdown" can be laid totally at Bush's feet. No single person, not even a president, has the power to change and control things by themselves. A president cannot introduce a bill to congress. He can veto the bills sent to him, but has no means, other than persuading one of his party member to introduce it, to get a bill started.

Has the GOP blocked some bills? Yes. But contrary to some press reports and some posting here, I don't believe they have blocked them solely because they are protecting Wall Street or are against the primary reason for the bill.

When a bill that you like is blocked, take a look at the actual bill and the amendments to it.

Is it written clearly and understandably with sensible and workable methods in it?

Is it burdened with Amendments that have nothing to do with the actual bill it's self?

Is it more regulation on top of existing regulation that is not being enforced?

Is the bill simply a political agenda by one side or the other, written by someone who actually knows little or nothing about what they are writing the bill about?

I don't know what they can do, but clearly there needs to be some reform on the whole process. Attaching budgetary items or environmental regulation to a "jobs" bill, for example, lessens the possibility that that "jobs" bill will make it through. Other things have also been tried and blocked like trying to artificially "protect" jobs in America by restricting outsourcing without actually addressing the causes of outsourcing is, imo, a bad way to go about making real, meaningful changes.

Instead of all the complicated and distorted mess that comes out of congress, why have they not simply made interest only loans illegal? From my point of view, if a person can only afford the interest on the house that you are buying, then that person cannot actually afford the house and should not be buying it.

Also from my point of view, keeping the interest rates artificially low is only an attempt to encourage economic development through debt and credit. Building an economy based upon debt and credit will always crash at sometime in the future and any politician encouraging such is simply trying to protect their own jobs and are not looking to the longterm future and health of the nation.

Congress and the president need to start using the "KISS" (Keep It Simple Stupid) principle, address one issue at a time. Keep all amendments related to the actual subject. Balance regulation with economic needs. Make only laws that are doable, logically applicable (and not just someones "pipe" dream) and enforceable.