Victory in Iraq and More Paper Magic

A writer who goes by the name "Sardine," one of the crew Atrios has brought in so he can take occasional breaks, has a stronger stomach than I do, because he or she still watches cable news sometimes. He watched yesterday and reports:

Twas another day of non-stop cable news coverage of Jackson and Palin. Not sure they covered anything else really. I get that the death of the "king of pop" and Palin's somewhat surprising decision not to run for re-election are newsworthy items, but 24 hours a day...for days now.

Apparently nothing else is happening in the world right now. Nothing at all.

Actually, there is some marginalia happening, and though not as newsworthy as our finally getting Michael Jackson in the ground or chronicling the latest absurdity to issue from Sarah Palin's moosemeat pie hole, Iraqi celebrations of America's great victory in their country, and Wall Street's creative, innovative, cutting-edge solution to the financial meltdown and ensuing recession merit a brief mention.

Sectarian violence in Iraq continues to escalate in the wake of U.S. troops withdrawing from that country's cities. In the northern town of Tal Afar, a pair of coordinated suicide bombings killed at least 34 yesterday. A couple of improvised explosives went off near a market in Baghdad's Shiite enclave of Sadr City killing seven, and a dozen more died in a pair of car bombings near Shiite mosques in Mosul.

The New York Times has the full story. I'm sure the people of Iraq will be forever grateful to George W. Bush and his Merry Men plus Condoleezza for delivering them from the horrors they experienced under the regime of that brutal dictator Saddam Hussein.

Meanwhile, in other barely noticeable news, the Wall Street trading firm Morgan Stanley announced that it has come up with a partial solution for dealing with the enormous mountain of bad paper that caused the financial meltdown of '08, which precipitated the Great Recession. Lest anyone forget, all those worthless, mortgage-backed so-called "securities" are still on the banks' books as liabilities, are still effectively shutting down the credit market, and have stymied all government and private attempts to deal with them.

Morgan Stanley's solution is to repackage them and call them something else. Apparently this is intended to impart value to what are now totally worthless scraps of paper, and will enable Wall Street's Lords of Kapital to start working that old paper magic again, the same kind that gave us hallucinated affluence in the 90's and double-oughts, and has been our undoing.

The magical process by which this garbage, these collateralized debt obligations and credit default swaps backed by mortgage loans made during the great real estate bubble, will be turned alchemically into gold, is very complicated, and I won't go into detail here. The pertinent paragraph from the Bloomberg story covering this development should be sufficient to convince the discerning reader that the work of the evil sorcerers in their enchanted skyscrapers continues, even as the federal government announces the advent of "reform."

Morgan Stanley is copying a financing structure known as Re-REMICs that bundle mortgage securities into new bonds that often offer investors an additional layer of protection, or collateral, from downgrades. Credit-rating cuts may sometimes force investors to sell the debt and cause financial institutions that own the bonds to increase capital.

Jennifer Sala, a spokeswoman for Morgan Stanley...declined to comment.

Things are not hopeless, though. I have a plan to solve both these worrisome situations at once -- we could hire all of Iraq's bombers, active and potential, and put them under contract to reform Wall Street.