But Wall Street is making more investments, known as structured financial products, and escaping new financial regulations, such as the Dodd-Frank bill that did not change the structure of how loans are bundled — which, when done riskily, causes crisis.
Tad Phillips, a commercial real estate analyst at Moody’s rating agency, told the Times: “The players in the business are generally the same as they were before. … Because it’s the old players, they know how to push the boundaries.”
The Times reported that banks have issued $26 billion in new collateralized loan obligations, or loans pooled and given to poorly rated companies, in just 2013 alone — more than what they issued in all of 2007. The Times stated, “Demand for the loan pools has been so brisk that banks have been able to loosen underwriting standards on the underlying loans and bonds. This provoked the Federal Reserve to release guidance last month  warning that “prudent underwriting practices have deteriorated.”
The Times also reported that “57 percent of the outstanding money in commercial mortgage-backed securities” was in risky, interest-only loans before the crisis. It has now reached 34 percent — 11 percent more than two years ago.
The banks are doing what thy did before the meltdown of 2006-07. They take mortgage loans and place them in bundles. They then say those mortgages represent potential profits as the retail value of the property increases. Those bundles are now secures or just a few degrees removed from being a bet at the horse track. All the way back in the early aughts these same people genuinely thought the value of real estate would never go down. Though they did hedge those bets by buying derivatives – a kind of insurance. If their bundled securities – home mortgages, credit car debt and even car loans – should go down in value the derivatives will pay off the loss. Derivatives, not necessarily a bad concept if done correctly, themselves became more important than ever in the economy. The housing market crashed. Those bundled securities – CDOs ( collateralized debt obligations) lost a lot of value – well into the trillions. The derivatives did not cover losses because the financial houses that sold them did not have enough capital in reserve to pay off such historic losses. So here we go again. And we will not see a bill passed to reign in this corrupt behavior because such regulations are anti-business, communistic and anti-American according to conservatives.
Lucia Joyce, daughter of James and Nora Joyce. 1932, by Eugene Jolas. Lucia was born with an eye defect, strabismus, which her mother had also. Not a horrible burden but it may have been one of the things that affected her behavior, making her seem quirky at times. Especially in hindsight as people pondered how she became so mentally unstable in her twenties that she was committed to a mental hospital. Whether she truly needed to be institutionalized at the time is debatable. The institutionalization itself probably did push her the rest of the way. More here, The difficulties of being James Joyce’s daughter.