Wall Street’s short memory: A return to high-risk mortgage products

In a resurgent real estate market, Wall Street is back to its old tricks, weaving together the same type of complicated financial instruments and mortgages that wreaked havoc during the housing bust, the New York Times reported.

Investor optimism coupled with a strong real estate market and the Federal Reserve’s policy of maintaining low interest rates has allowed banks to revive these instruments, known as structured financial products. The safest of these investments can offer interest rates almost twice those paid out by U.S. Treasury securities, according to RBS securities, which was a previous player in the structured financial products game. But these investments have once again managed to avoid the scrutiny of government regulators. [more]