Deal Journal: You were right back in April. You called it all. Why does Wall Street keep messing up?
Jim Keegan: It’s too profitable to stop. It’s too profitable at the individual level, so the individuals interests are not necessarily aligned with the company’s interest. Pay me now and you pay for it later.
There is no clawback. Employees can walk away with hundreds and tens of millions of dollars. And someone else will hire them to do it again.
DJ: What else do the crises at Citigroup and Merrill Lynch teach us?
JK:This is the first time that the securitization markets are being tested. We can look at other products, like high-yield, where you track the amount of high-yield deals that have ultimately defaulted. Usually the market charges a premium to the firms that have the worst-performing deals. Will that happen this time? I don’t know if we’re ever going to see these products come back. Certainly not to the extent that were generated in the last five years.
When you think and look and say, ‘you can package together a whole slew of risky products and somehow create a Triple A-rated product and get paid more for it’, that just defies common sense. In this cycle as in other cycles, common sense is not that common....MORE
That bolded bit reminded me of "Merrill Lynch touts carbon note"
What could possibly go wrong with a packaged product built on paper claiming the absence of an invisible gas?
Carbon finance (reg. req.) is reporting:US investment bank Merrill Lynch is understood to be pre-marketing a structured emissions product to provide private investors with exposure to the EU allowance price.