Remember me? Wall Street repackages toxic debt

[Amerigo Vespucci]

Source: Associated Press

WASHINGTON — Wall Street may have discovered a way out from under the bad debt and risky mortgages that have clogged the financial markets. The would-be solution probably sounds familiar: It's a lot like what got banks in trouble in the first place.

In recent months investment banks have been repackaging old mortgage securities and offering to sell them as new products, a plan that's nearly identical to the complicated investment packages at the heart of the market's collapse.

"There is a little bit of deja vu in this," said Arizona State University economics professor Herbert Kaufman.

But Kaufman said the strategy could help solve one of the lingering problems of the financial meltdown: What to do about hundreds of billions of dollars in mortgages that are still choking the system and making bankers reluctant to make new loans.

Read more: http://www.google.com/hostednews/ap/article/ALeqM5gnQ3aW_Imd7B9GPdfyirLjyzoc3gD9A9CVP00

[percussivemadness]

1. yes and no

The problem before was that people were looking to make a quick buck. If you repackage these toxic loans and give a minimum of say 5-10 years before anyone can see a return, this would solve this problem on many fronts. Firstly, property does invariably rise in value over a 10 year period because wages in theory do. Secondly, by recapitalizing the banks they have money to lend again. They can`t lend until something is done with the bad loans on their books, this to me would seem like a sensible solution, providing of course whatever is devised is a long term investment rather than a short term gamble, because as you say in your original post, that is what caused the problem in the first place.

[berni_mccoy]

2. That is the problem. Wages and Property values have only kept pace with inflation

From 2001 to 2009, inflation rose 23%. Amazingly, so did wages.

CPI from 2001 to 2009 went from 171 to 251. (data from http://www.bls.gov/oes/oes_dl.htm)

Average annual wage went from 34k to 42k. (data from http://www.bls.gov/oes/oes_dl.htm)

Meanwhile, inflation adjusted house values are exactly where they were in 2001. (data from http://mysite.verizon.net/vzeqrguz/housingbubble/)

So, your argument for repackaging these toxic loans as new products doesn't hold any weight here.

[pattmarty]

3. They're only forgetting one BIG thing: R-E-G-U-L-A-T-I-O-N........

......IF the banks and investment houses have regulations and rules it could work. If not, it's the wild west all over again with only a short matter of time for another LARGER YET collapse. I am not against a lot of this "money shit" if there is responsible regulation. Without that, you have wild west, casino, crazy, or whatever you want to call it without any protections for investors, borrowers, or the general public.