JPMorgan and Goldman also have Alchemists in their teams

Following Morgan Stanley last week, it is now JPMorgan's and Goldman's turn to convert lead to gold, or in the investment banking lingo, to convert Junk rated securities into investment grade securities. This sounds like a 'reverse-CDO' type of operation. It didn't work in the first way, but maybe it will work in the second?
July 15 (Bloomberg) -- Originally top-ranked securities created in repackagings of home-loan bonds last year by JPMorgan Chase & Co. and Goldman Sachs Group Inc. had their ratings cut to below investment grade by Moody’s Investors Service.

The securities were among the 15 classes of five so-called Re-REMICs from 2006 or 2008 whose grades were lowered by Moody’s because of the “deterioration in performance and ratings” of the underlying bonds, the New York-based ratings firm said in a statement today. One class rated Aaa in the JPMorgan deal from December was cut to B2, or five steps below investment grade.

Securities firms have stepped up the use of such resecuritizations this year in order to create more valuable debt to sell or restructure investors’ holdings, expanding last month from home-loan bonds to commercial-mortgage securities and collateralized loan obligations backed by company loans. More than $27 billion of home-loan bond Re-REMICs have been issued this year, up from $17 billion for all 2008, according to a report last month by Bank of America Corp.

Re-REMIC stands for “resecuritizations of real estate mortgage investment conduits,” the formal name of mortgage bonds. Some of the new securities created in the deals offer investors an additional layer of protection from losses and downgrades, which boost the capital needs of banks and insurers and can force some investors to sell debt.
For more details, please refer to the previous post.

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