Beware: Wall St. debt re-packaging machine.... it's ba-aaack

[Bill USA]

http://www.usatoday.com/story/money/markets/2013/09/08/investing-risk-2008-financial-crisis-lehman/2766835/

Complex securities — similar to those that fueled Lehman's demise — were revived as investors stretched for yield in a low-rate environment.





Wall Street's re-packaging of debt into an alphabet soup of complex, leveraged investments helped fell Lehman Brothers five years ago this month and brought other financial institutions like AIG to the government's door begging for bailouts.

This slicing and dicing — known as securitization or structured finance — is on the rebound, and not much has changed in the way it is done. If it catches on in a big way again, the financial system could become fragile once more, experts say.

"It's basically the same people doing the same things all over again, only more intensely," says Brian Reynolds, chief market strategist at Rosenblatt Securities. "In the long term we should be worried."

In the first half of 2013, $424 billion worth of asset-backed securities (ABS) were sold, putting the structured finance market on course for its biggest year since 2007, according to data from Dealogic. JPMorgan Chase, the largest U.S. bank, is the top underwriter so far this year, followed by Bank of America Merrill Lynch and Citigroup.

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"Regulators are defining the standards so low that they don't mean much," he added. "And it feels like the banks have been slow-walking this so that, [font color="red"]at some point, the industry can go back to selling these securities the way they always have.[/font]"

(more)

[Warpy]

1. It never really left

because banks successfully fought off the regulations that would have stopped the practice.

The CDOs now are at least as toxic, based at least in part on student loan debt that will be uncollectable as time goes on.

The next crash is inevitable.