Long Live Synthetic CDOs

June 24 (Bloomberg) -- My, how quickly we’ve forgotten thelessons of the financial crisis. Even though the debt marketshave once again mispriced risk -- when junk bonds yield a mere 5percent, you can be sure serious trouble is brewing -- I amreferring instead to the fact that what caused the financialcrisis remains unheeded.

For instance, the Financial Times recently made a big dealof how bankers at Morgan Stanley and JPMorgan Chase & Co. tried,and failed, to put together the first synthetic collateralizeddebt obligation since the onset of the 2008 crisis. The dealfell apart because there wasn’t enough investor demand forvarious tranches of the security.