It’s always 2006 somewhere.
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.
By “first transaction of its kind” they presumably mean it’s the first time that toxic assets — which have been downgraded — have been polished with AAA magic. Obviously, the basic product is an old one.
Karl Denninger thinks it’s more bankster scamsterism all the way.
But we defended the re-emergence of CDOs earlier this week, and we’re still not convinced that there’s a big problem here. Is there something fundamentally wrong with repackaging risky assets in some manner such that you create relatively safe slices?
We’ll stick our necks out and say that the people buying into this won’t get burned this time around. Asset values are way down, and caveat emptor rules the day — basically the exact opposite conditions there were in 2006.
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