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The devil wears (structured) Prada

March 15, 2010

I know it may be hard, but take a moment to think back, WAY back to 2009 when a certain financial crisis brought the world to its knees. Man, that was a tough time eh? Sure am glad that our 2nd “great depression” wasn’t half as long as the first… Also, glad our gov’t has grabbed hold of the reins and taken prudent steps to ensure a similar crisis doesn’t happens again for, like, at least 4 years or so.
First on their agenda – the poster boy for the crisis – the culprit for like a quadrillion in losses – CDO’s and other Structured Credit products. These complex, hard to price and illiquid instruments single handedly bankrupted investors all the way to Iceland.
The more banks were able to remove loans from their balance sheets via securitization (the “shadow” banking system) – the less stringent loan standards became. Greenspan waffled on about how structured products and credit derivatives spread risk which happened to be concentrated with the banks and their overpaid loan officers and risk managers… RIght. Good call. That man needs to expire.
“How did problems in the mortgage sector in the United States trigger losses in so many countries? The answer lies in structured products: CMOs and CDOs” -CDOs and the Credit Crisis

Phew… Boy am I glad those things are gone and never to be seen again!

Bloomberg:
“The market for collateralized debt obligations backed by high-yield, high-risk loans is poised to reopen in the U.S. for the first time in a year after losses on mortgages prompted investors to flee bundled securities.”

If the Gov’t even gets one whiff of these shenanigens, oh boy are they gonna put the kibosh on it.

“Citigroup Inc. is underwriting a $500 million fund”

The same Citigroup which the Gov’t owns a controlling interest in?????
This is a nightmare. Somebody pinch me please.

“This is the first baby step to getting the market going again,”

This marks a “return to investments that contributed to $1.7 trillion of writedowns and credit losses.”

Well, at least the banks have learned their lesson

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3 Comments leave one →
  1. A. Strung permalink*
    March 16, 2010 10:34 am

    I think the idea is that we AVOIDED a second depression, so reminiscing about it, sarcastically or otherwise, doesn’t make much sense.

  2. debaseface permalink
    March 16, 2010 6:37 pm

    Oh thats right, we AVOIDED a depression.
    Sorry then. Nevermind,
    Back to business as usual eh? Somebody turn on the old juke box cause its time to start dancing.

    Why reminisce about the past (sarcastically or otherwise)?
    This time its different.

  3. A. Strung permalink*
    March 17, 2010 3:13 pm

    I didn’t say we avoided a depression, I said the IDEA is we avoided a depression.

    I don’t think back to business and usual is the plan, as advertised. It’s slow, but they are trying to write new regulation legislation. How effective it will be who knows, but at any rate no-one’s saying “crisis averted, let’s go back to how things were”. And very little happens quickly in the US Congress.

    As for reminiscing, I wasn’t talking about the past, I was saying there’s no point reminiscing about something that didn’t happen. It’s just weird.

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