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Here we go again, even before we’ve cleaned up the first mess

From Bloomberg (via Josh Marshall):

Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale. …

Two years after the credit markets began to seize up, costing the world’s biggest financial institutions $1.47 trillion in writedowns and losses, banks are again taking so- called structured finance securities and turning them into new debt investments with top credit ratings. While the Morgan Stanley deal is the first to involve CDOs of loans, banks have been doing the same with commercial mortgage-backed securities in recent weeks.

Life is certainly more speeded up these days. It took 66 years for Congress to un-learn the lessons of the Great Depression (1933: passed the Glass-Steagel Act; 1999: repealed it). It took these bankers less than nine months to unlearn the lessons of the Great Bailout. But then, maybe they’ve learned those lessons only too well. Why not act recklessly if you know you’ll cash in with big bonuses and that Uncle Sam will ride to the rescue when disaster strikes. Meanwhile, Congress appears to have learned nothing, except how to take money from bankers eager to destroy the economy yet again.


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