Posted on 07/08/2009 4:26:23 PM PDT by FromLori
The banks just never do quit, do they?
July 8 )-- 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.
Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.
Let's translate this into english for the less-financially-literate.
We're going to take this trash that was originally rated "AAA" by all the major ratings agencies that we bought the rating from (and paid for it too - booya!), got downgraded, and cost investors millions, and wave our arms around.
Through the magic of re-securitization (while extracting a few more basis points in a second set of fees for ourselves!) we will make this Baa2 (nearly junk) debt back into pristine "AAA" credit once again, according to the bought-and-paid for (again) ratings agencies, and then we will sell it to the same suckers that got ripped off the first time!
The sad part is that they will probably find people who are dumb enough to get screwed not once, but twice, even though the bank has managed to extract a second set of fees from the original credit margin in the deal.
Back to basics folks - when a set of loans are made the true risk-adjusted return is a fixed amount. Every person who touches the deal demands something for their trouble, as nobody works for free.
Therefore the more levels of indirection and complexity are layered on the lower the total return of the deal has to be, because the fees have to come out of the total income stream.
It cannot be any other way; you cannot create more value than was originally there (claims otherwise are equivalent to claiming to have discovered perpetual motion) and as such there is no possible way in aggregate for anyone except the bank that does the securitizing to benefit from securitization, and in fact everyone who owns that "stuff" is giving up some of what they could otherwise obtain by buying this crap.
P.T. Barnum was right.
So this is probably the perfect place for it.
It may not be possible to create value, but there's a significant likelihood of being able to pull in Other People's Money (e.g. government "bailouts") to manage a net benefit to one's "investors".
And your daily KOS nonsense is even sillier.
I think you're making that perfectly clear....
Market Ticker has a forum you should tell him about it.
Oh, just wait. Give it a few years and the GOP will be pressing to de-regulate this.
parsy, who is beginning to think the GOP is un-trainable
Follow the link to Market Ticker that FromLori posted.
This was one of the main sights that I learned about CDS (credit default swaps) and other financial stuff. I now have a better sense of what is really going on. The MSM has a huge conflict of interest, their advertisers aren’t too interested in the J6P finding out the truth.
It's total crap, and you should feel like a fool for believing a word of it.
If you wish to trust the financial thieves on Wall Street, and the continued obfuscation of the press as to what is really happening IN THE MARKETS, fine.
But your continued defense for the rip-off of the American middle class into debt slavery is not acceptable to me.
My apologies, that was intended to be directed at ‘FromLori’ (who apparently doesn’t know much about business either, but see any reason that should slow her down).
In my haste I misread the comment author.
You and many others on this site need to choose your enemies more carefully. You think the problem is Wall Street but it isn't. Wall Street's part of the financial crisis was three dozen guys who are all long gone by now. Most of the people on Wall Street are as hones,t smart, and hard working as anyone you've ever met but not on FR. On FR they are just a good target for a lynching.
The problem is really in Washington, but you people are so busy looking for a witch to burn that you can't see that. And you'll listen to any agenda driven idiot who reinforces your childish view. No conspiracy is too ridiculous on FR anymore so long as it involves complicated finance, and a jew.
You should all be embarrassed.
You might want to read this as well
http://zerohedge.blogspot.com/2009/07/gold-anti-trust-action-committee-urges.html
No-one is "manipulating markets" and it's going to come to nothing. It's just the same old cast of characters trying to make names for themselves in government.
All these things fascinate me I am a bit of a news junkie so that is part of the reason I read all sorts of news.
But speaking of ZeroHedge the article refers to the Gold Anti Trust Action Committe urging the SEC, CFTC to probe the trading program. Where there is smoke....sometimes there is really a fire.
http://zerohedge.blogspot.com/2009/07/gold-anti-trust-action-committee-urges.html
It is the nexus of Wall Street and DC that is causing this implosion. IT IS BOTH OF THEM. They both stand to profit and the politicians won’t do anything about it because they depend on the cash for their campaigns. Wall Street is NOT innocent. And you have no idea who I listen to because I read a wide ranging number of blogs because one source of any kind will have a bias.
And I resent being accused of anti semititism.
YOU SHOULD BE ASHAMED OF YOURSELF, YOU DON’T KNOW ME!!!!
And you owe me an apology, eh?
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