Well, investment banks are repackaging them and selling them as Re-Remics (REsecuritizations of Real Estate Mortgage Investment Conduits):
Goldman Sachs Group Inc., JPMorgan Chase & Co. and at least six other firms are repackaging unwanted mortgage bonds as sales of CDOs composed of asset-backed securities fall to less than $1 billion this year from $227 billion in 2007 because of the global credit crunch. Re-Remics contain parts that are structured to guard against higher losses on underlying loans than most CDOs, allowing holders to sell or retain other sections at lower prices that can translate to potential yields of more than 20 percent.So this stuff is so toxic that sales have dropped by more than 99.6% year over year, and the solution is a new name and a new obscure mathematical model.
Of course, the banks will claim that Re-Remics are different, because they don't have subprime loans, just Alt-A.
Of course, as I've noted repeatedly, those are swirling around the bowl on their way down too.
It should be noted that there is a discount, but it still sounds like another CDO shell game:
While CDOs are backed by more than a hundred bonds, Re- Remics typically combine fewer than a dozen, allowing holders to more easily analyze the debt.If you are willing to take the investment houses' word on this, you are too stupid to be trusted with any device more complex than a bowling ball.
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A bond trading at 40 cents on the dollar could be split into a piece worth 80 cents and another piece that could then be sold cheaply enough to offer returns as high as 20 percent, Dachille said. Banks advised by First Principles bought lower-yielding senior pieces and some are also considering buying the bonds for their pension funds, he said. The firm is also starting a fund for pension clients that would invest in the debt, Dachille said.
Of course, the likely idiot customers would be pension funds, municipalities, and, of course, investment bankers.
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