MojoMan Posted July 10, 2009 Share Posted July 10, 2009 (edited) Wall Street trickery is back Posted Jul 09 2009, 12:41 PM by Kim Peterson Rating: Here we go again. From Bloomberg: "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." The Wall Street magicians are back to their old tricks. Banks are once again taking downgraded finance securities and whipping them into new investments with top credit ratings, Bloomberg reports. Morgan Stanley (MS) says it expects to receive top AAA ratings on its new securities, worth $87.1 million. One expert tells Bloomberg that some banks and insurers are only allowed to buy top-ranked AAA investments these days. So they're digging up stuff that is decidedly not AAA and turning it into the desired product. “You’re manufacturing AAA out of not AAA, therefore allowing those people who have AAA written on their forehead to buy,” said the expert, Sylvain Raynes of R&R Consulting. And Goldman Sachs (GS) is planning to sell $217 million of repackaged commercial mortgage debt, Bloomberg reports. Hmmm, commercial mortgages don't sound too enticing right now. But what do you want to bet that this new debt will be rated AAA? http://blogs.moneycentral.msn.com/topstock...ry-is-back.aspx[/url] Edited July 10, 2009 by MojoMan Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 10, 2009 Share Posted July 10, 2009 They aren't stupid, they are both shortsighted (because their companies can't think more than a maximum of three months ahead) and criminal. Quote Link to comment Share on other sites More sharing options...
The Wolf Posted July 10, 2009 Share Posted July 10, 2009 Did MS and GS receive taxpayer bailout money?? How are they allowed to do this crap?? Quote Link to comment Share on other sites More sharing options...
Egret Posted July 10, 2009 Share Posted July 10, 2009 Did MS and GS receive taxpayer bailout money?? How are they allowed to do this crap?? They're not government owned and can do what they feel is best to make money. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 10, 2009 Share Posted July 10, 2009 Morgan Stanley (MS) says it expects to receive top AAA ratings on its new securities, worth $87.1 million. Of course it does, since Morgan Stanley and the other crooks own the credit rating agencies too. What really amazes me is that some mug somewhere will buy this crock of poo. Quote Link to comment Share on other sites More sharing options...
Savage Beatings Posted July 10, 2009 Share Posted July 10, 2009 Why should they have changed their behavior? There were no consequences to them last time around. We'll just bail them out again. Right? Quote Link to comment Share on other sites More sharing options...
gbpfan1231 Posted July 10, 2009 Share Posted July 10, 2009 Why should they have changed their behavior? There were no consequences to them last time around. We'll just bail them out again. Right? Exactly - nobody learns when there are no consequences. Quote Link to comment Share on other sites More sharing options...
DMD Posted July 10, 2009 Share Posted July 10, 2009 They aren't stupid, they are both shortsighted (because their companies can't think more than a maximum of three months ahead) and criminal. dead on in all counts. Quote Link to comment Share on other sites More sharing options...
muck Posted July 10, 2009 Share Posted July 10, 2009 (edited) The idea behind a structred transaction is really no different than so many other transactions that don't get the same sort of ire. Essentially, MS is setting up a company with a specific capital structure ... say ... 50% senior secured debt, 25% subordinated debt, 15% high yield debt and 10% equity. The SSD gets priority with interest and principal payments, then the SD, then the HYD, and finally the equity. This is no different than how GE finances itself, or Johnson & Johnson, or any of a wide variety of other companies...the proportion of debt and equity will vary, but the idea is still the same. In this case, the company will own bonds back by (say) warehouses and apartment buildings. Johnson & Johnson owns a variety of brands, inventory in various stages of completion, intellectual property, real estate, etc (its a much more diversified business proposition). But, at it's core, its a similar business proposition. The only real difference is that one is essentially a holding company for assets and the other is an operating company. Each carries its own set of risks. No need to demonize one while giving a pass to the other... HOWEVER, the trouble is when things are built on top of one another and leverage begets leverage... Edited July 10, 2009 by muck Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 10, 2009 Share Posted July 10, 2009 The only real difference is that one is essentially a holding company for assets and the other is an operating company. Each carries its own set of risks. No need to demonize one while giving a pass to the other... Apart from the fact that the former is a worthless paper-pushing mechanism manufacturing or producing nothing while the second actually makes stuff. Quote Link to comment Share on other sites More sharing options...
tonorator Posted July 10, 2009 Share Posted July 10, 2009 Apart from the fact that the former is a worthless paper-pushing mechanism manufacturing or producing nothing while the second actually makes stuff. that does seem like a material difference to me ... Quote Link to comment Share on other sites More sharing options...
muck Posted July 10, 2009 Share Posted July 10, 2009 You're focusing on the activities of the entity, not the financing of that entities activeities. I'm simply discussing corporate finance, not corporate management, operations or behavior. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 10, 2009 Share Posted July 10, 2009 (edited) its just like fantasy football. there are some good players(good paper) and there are some horsesh1t players(bad paper). you just have to draft correctly and hope for no injuries. the problem lies with the rating agencies. they are crap. its like me running the huddle. your fantasy team wouldnt do very well. Edited July 10, 2009 by dmarc117 Quote Link to comment Share on other sites More sharing options...
bpwallace49 Posted July 10, 2009 Share Posted July 10, 2009 Yay capitalism! **Waiting for the inevitable spin on how this is all Obama's fault** Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 10, 2009 Share Posted July 10, 2009 the problem lies with the rating agencies. they are crap. The rating agencies are completely dependent for their money on the very companies whose products they are rating. It isn't that they are crap, per se, they are just institutionally corrupt. Until a way is figured for them to be funded differently, they'll keep churning out whatever rating the customer wants. They are no different to a house appraiser in the pocket of realtors or mortgage lenders. Quote Link to comment Share on other sites More sharing options...
Perchoutofwater Posted July 10, 2009 Share Posted July 10, 2009 The rating agencies are completely dependent for their money on the very companies whose products they are rating. It isn't that they are crap, per se, they are just institutionally corrupt. Until a way is figured for them to be funded differently, they'll keep churning out whatever rating the customer wants. They are no different to a house appraiser in the pocket of realtors or mortgage lenders. So basically the rating agencies have the same relationship with these institutions as Obama, Dodd, and Frank had with Freddie and Fannie? Quote Link to comment Share on other sites More sharing options...
bpwallace49 Posted July 10, 2009 Share Posted July 10, 2009 2 posts until somone mentioned Obama! Thanks for not disappointing Perchie! Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 11, 2009 Share Posted July 11, 2009 So basically the rating agencies have the same relationship with these institutions as Obama, Dodd, and Frank had with Freddie and Fannie? Credit ratings agencies being funded by the companies whose products they rate is the same as OSHA being private and funded by the manufacturing and construction industries. Quote Link to comment Share on other sites More sharing options...
Perchoutofwater Posted July 11, 2009 Share Posted July 11, 2009 Credit ratings agencies being funded by the companies whose products they rate is the same as OSHA being private and funded by the manufacturing and construction industries. So you are saying it is the same as Obama, Dodd, and Frank receiving campaign donations from Freddie and Fannie, cool I just wanted to make sure you weren't being hypocritical. Quote Link to comment Share on other sites More sharing options...
Clubfoothead Posted July 11, 2009 Share Posted July 11, 2009 So you are saying it is the same as Obama, Dodd, and Frank receiving campaign donations from Freddie and Fannie, cool I just wanted to make sure you weren't being hypocritical. Just like Robert Bennett, Spencer Bachus and Roy Blunt, that's tired, even for you. But it doesn't matter if you are talking about Mike Crappo or Barney Frank, really. Still does not strike me as anywhere near the same. Quote Link to comment Share on other sites More sharing options...
Randall Posted July 11, 2009 Share Posted July 11, 2009 Many of these guys should be in jail. What an insurance scam this was. Phil Gramm puts in an amendment in 1998 bill to get rid of protections we've had since the depression, others sold bad mortgages and bundled them around the world. AIG rated these AAA and sold insurance on what they were rating. Then they basically took bets on risk, They made Wall Stretta #### casino. When payments came due they said they couldn't pay and made us taxpayers pay. These guys brought down the world economy. Where are the prosecutions? Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted July 11, 2009 Share Posted July 11, 2009 I just got back from making some AAA rated securities downstairs. I used some Glade to cover up the smell, too. Quote Link to comment Share on other sites More sharing options...
Brentastic Posted July 11, 2009 Share Posted July 11, 2009 I just got back from making some AAA rated securities downstairs. I used some Glade to cover up the smell, too. That's funny stuff right there Quote Link to comment Share on other sites More sharing options...
BLIND HOMER Posted July 11, 2009 Share Posted July 11, 2009 That's funny stuff right there the southern retards wont get it Quote Link to comment Share on other sites More sharing options...
millerx Posted July 11, 2009 Share Posted July 11, 2009 the southern retards wont get it wow! your name really suits you, huh.... Quote Link to comment Share on other sites More sharing options...
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