unfuckingbelievable

I tried to post on this yesterday, but Li’l Kim clogged my intertoobz:

July 8 (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.

Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.

Two years after the credit markets began to seize up, costing the world’s biggest financial institutions $1.47 trillion in writedowns and losses, banks are again taking so-called structured finance securities and turning them into new debt investments with top credit ratings. While the Morgan Stanley deal is the first to involve CDOs of loans, banks have been doing the same with commercial mortgage-backed securities in recent weeks.

A lot of banks and insurers “cannot buy anything but AAA,” said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” which is due to be published in November by Oxford University Press. “You’re manufacturing AAA out of not AAA, therefore allowing those people who have AAA written on their forehead to buy.”
…
Structured finance securities fueled the writedowns and losses at the world’s biggest financial institutions since the start of 2007, helping to plunge the U.S. economy into the worst recession since the 1930s. Finance companies have been forced to raise $1.27 trillion in capital, according to data compiled by Bloomberg.
…
Banks are using re-REMICs to protect against losses on residential-mortgage securities during the worst housing slump since the Great Depression.

About $27 billion of home-loan bond Re-REMICs have been issued this year, up from $17 billion for all 2008, according to a June 12 report by Bank of America Merrill Lynch. Re-REMIC stands for “resecuritizations of real estate mortgage investment conduits,” the formal name of mortgage bonds.

‘Make Magic’

The strategy is increasingly being used for commercial mortgage debt.
…
“Somebody does something and it seems to make magic, and the other guy says ‘Hey, let’s do that, too,’” Raynes said.

New York-based Goldman Sachs plans to sell $216.9 million of repackaged commercial mortgage debt, according to people familiar with the sale who declined to be identified because terms aren’t public. The re-REMIC is being carved out of four bonds sold in 2006, said the people. Michael DuVally, a Goldman Sachs spokesman, said he couldn’t comment.

Anyone in the Obama Admin care to comment on this? Larry Summers? Little Timmy? Anybody?

Jesus Christ on a Hermes-covered throw pillow: Do they never learn? Or care? Or get sent to a fucking mental ward?

h/t atrios