Wall Street analysts are saying some of the risky investment products that
ignited the 2008 financial crisis are making a comeback.
The reasoning is simple. Equities have been soaring of late and the appetite for risk is returning. But some analysts are wondering how the Dodd-Frank financial overhaul bill that was meant to ward off a repeat of the financial crisis might have missed a trick or two, The New York Times reported Friday.
"All of this seems like a fairly quick round trip," said Manus Clancy, a managing director at Trepp, a commercial real estate business research firm.
"You are seeing a fair number of sins being forgiven," Clancy said, referring to the return of risky bets on Wall Street.
Obscure-sounding products like collateralized debt obligations, which are derivatives based on fixed-income assets, are on the rebound. In 2013, year to date, $33.5 billion in bonds backed by commercial real estate have been sold by U.S. banks, the Times reported.
"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," Tad Phillips, a commercial real estate analyst at Moody's rating agency told the Times.
How are things different with the Dodd-Frank overhaul bill in place? New regulations are forcing banks to take more steps to bundle loans into what are called securities or structured investment products, but the products, once bundled, look the same as before the crisis, the Times said.
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