Matt HealeySunday,10 February 2013

The Snap

This is disturbing. Apparently the sub prime mortgage backed securities market is back and hot. I don’t know if the banks are leveraging themselves 2 billion to 1 so they can buy mezzanine CDOsBecause that worked out so well last time.

The Download

Let’s look at what we claimed to learn. We cannot allow rampant speculation by the financial services industry. We cannot allow banks to become too big to fail. We stress test the banks to make sure that they have sufficient capital to survive a financial downturn. We have established the consumer financial protection bureau. Granted the bureau is impotent because the evangelical christian party of god has been blocking a confirmation vote on the head because they do not like the bureau.

Now let’s look at what we really learned. If you screw up big enough you will make millions and the government will bail you out. You can take huge risks and if they work, you make millions, if they do not work, you make millions consulting to the government on how to clean up the mess. Given these “lessons,” are we really surprised that this market is gaining ground again? So, will it end badly as the article asks — no, I hope is does not end badly — I hope it ends in fire.

Hat Tips

CNBC, The Big Short, Consumer protection, Blocking Confirmation, B5, Image Credit: Flickr

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