Wednesday, February 03, 2010

Securitisation: new US measures to tackle hocus pocus

For securitisation geeks, this somewhat arcane post, from a respected industry insider usually highly critical of the Obama administration's weak-kneed approach to the "banksters", is worth reading. It is about proposed reforms to the shadow banking sector, including provisions to expose the emperor's new clothes as regards off balance sheet gymnastics (apologies for that horribly tangled metaphor, evoking images of naked gymnastics . . . . )

As a broad tax justice issue, "off balance sheet" is in several ways analogous to, and it overlaps heavily with, "offshore" - for secrecy jurisdictions essentially sell the rules and laws that these kinds of structures need, and that is where a lot of this stuff happens.

Some brief excerpts (but read the post for the red meat of the proposals):

"CDOs are a bad product . . . and ultimately a Ponzi scheme.
. . .
The industry’s reaction suggests the supposed magic of securitization was (perhaps with the exception of very high quality borrowers) mere hocus pocus."

How about some of the same in that other great global financial centre, the Square Mile?


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