They're B-A-C-K !!!

You probably thought that the idea of financial alchemy was as dead as a dormouse after the catastrophe of last winter. But you would be wrong.

Here's an article that says that Wall Street has discovered a "creative solution" for all that toxic waste on its balance sheets. Wait! You will never guess... it is to slice-and-dice and with a little pixie dust you turn A rated bonds into AAA rate bonds!

Hey wait... that's exactly what caused the implosion of Wall Street.

But they are at it again. Why? Because there has been no regulation. Nobody has had to do a perp walk. Because the Bush and Obama administrations have treated the big Wall Street banks with kid gloves and tanked them up with hundreds of billions of taxpayer dollars. So they are revved up and ready to go again with the same financial wizardry that created the last crash-and-burn.

Here are some key snippets from the article "Remember me? Wall Street repackages toxic debt" by Matt Apuzzo and available off the Associated Press:

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.

These are holdovers from the housing bubble, when home prices soared, banks bought risky mortgages, bundled them with solid mortgages and sold them all as top-rated bonds. With investors eager to buy these bonds, lenders came up with increasingly risky mortgages, sometimes for people who could not afford them. It didn't matter because, in the end, the bonds would all get AAA ratings.
When the housing market tanked, figuring out how much those bonds were worth became nearly impossible. The banks and insurance companies that owned them knew there were still some good mortgages, so they didn't want to sell everything at fire-sale prices. But buyers knew there were many worthless loans, too, so they didn't want to pay full price for the remnants of a real estate bubble.

In recent months, banks have tiptoed toward a possible solution, one in which the really good bonds get bundled with some not-quite-so-good bonds. Banks sweeten the deal for investors and, voila, the newly repackaged bonds receive AAA ratings, a stamp of approval that means they're the safest investment you can buy.

"You've now taken what was an A-rated security and made it eligible for AAA treatment," said Richard Reilly, a partner with White & Case in New York.

...

CDOs are already complicated. Repackaging them makes it harder to figure out what the investment is worth. The more obscure the concept, she said, the more likely the deal has gotten too creative.

Can you believe it? They are going to pull the very same scam just 12 months after it crashed and burned.