It sure sounds like it. A few months ago Bill Clinton provided a strong defense of Wall Street and blasted liberals who were upset with the easy handling of Wall Street. At the time, Clinton argued that the rhetoric needed to cool down because after all, Wall Street had not done anything illegal during the bubble years. While we may eventually have a few convictions related to driving up the bubble, for the most part, Clinton was correct. That's also the problem according to many on the left. If these actions were in fact legal, it's only because too many in Washington from both parties caved in to Wall Street and let Wall Street write their own rules of the game.
A ProPublica analysis shows for the first time the extent to which banks -- primarily Merrill Lynch, but also Citigroup, UBS and others -- bought their own products and cranked up an assembly line that otherwise should have flagged.
The products they were buying and selling were at the heart of the 2008 meltdown -- collections of mortgage bonds known as collateralized debt obligations, or CDOs.
As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created -- and ultimately provided most of the money for -- new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain [1] that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.
Individual instances of these questionable trades have been reported before, but ProPublica's investigation, done in partnership with NPR's Planet Money [2], shows that by late 2006 they became a common industry practice.
