"I call do-over!"

So, props to Kevin Drum for letting us know. The same people who threw the shit and the shinola into a blender a few years ago to make those mortgage-backed securities that worked out so well for everybody are at it again, with the very same scam, except this time they're being really careful (pinkie swear!) to include only solvent, performing mortgages in the AAA-rated stuff. They're called -get this- Re-Remics, and they are, so far as I (a non-specialist) can tell, pretty much the same as the Collateralized Debt Obligations that nearly took down the American economy just one short year ago.

Here's how it works: Banks all over are currently stuck with whatever toxic crap they had on the books when the music stopped and the last chair was pulled. Because the crap is toxic, they're required to keep money on hand to cover it in case it goes even further south. The worse the rating, the more money the bank has to keep on hand. So, say you've got a CDO that's seventy-five percent non-crap and twenty-five percent crap. The twenty-five percent that's crap drags the rating of the whole thing down, say to a C, which means the bank has to keep 100% of the value of the CDO on hand, which means they can't use that money to refurbish the offices or buy a politician. Enter the magical masters of the universe, with scissors and calculators and a lovely assistant who draws your attention over here to her lovely boobs while the magician goes to work with the scissors and some glue and -voila!- you've suddenly got two CDOs, one good, one crap. Get the good one rated back to AAA, and suddenly the capital requirement is only 100% on the lesser share; for the newly-minted AAA investment vehicle, the capital requirement goes down, which means the bank can go ahead and call the interior decorator and fire up the corporate jet for some serious fact-finding. And hey, with any luck, maybe they can sell the good paper. There is a sucker born every minute, and nobody ever lost money underestimating the intelligence of the American people.

On paper, it makes sense. The problem is that the people doing the Re-Remicing are the very same magical masters of the universe that nearly took the whole house of cards down last year, and the same ratings agencies that dropped the ball last time (and have suffered, inexplicably to me, no consequences at all) are still in charge of saying what's shit and what's shinola.

How do you suppose that's gonna work out?