It´s a year since the Lehman Brothers collapse and we read in the New York Times over the weekend about investment banks securitizing bonds backing the proceeds from life insurance policies bought from elderly people looking to cash in benefits before they die. Since the CMBS and RMBS markets are dead, the Wall Street houses dream up another fee machine to boost profits and bonuses. This new product gets floated despite unresolved questions about the risk return issues involved, let alone the questionable idea of subverting what life insurance is supposed to provide.

And meanwhile let´s get back to CMBS-everyone in the real estate business is petrified about the consequences of hundreds of billions of dollars in CMBS loans maturing over the next five years. Many of these loans are poorly underwritten (especially later vintage), most at favorable terms and interest rates to borrowers relative to what they would be able to achieve even if markets were more liquid today. And given the broken CMBS engine and ongoing credit crisis, we all know CMBS refinancing is a huge issue which threatens to undermine any real estate market recovery, particularly since nearly everyone expects interest rates to increase over the next several years. Already underwater borrowers and many who are merely struggling with declining property revenues could be toast if they can´t rollover their loans.

But resolving the CMBS market mess is tomorrow´s business given the politicos and bankers are still trying to steady the financial system in the aftermath of last year´s meltdown highlighted by Lehman. You would think new regulation of securities markets must be part of the solution to bring confidence back to the broken system since bond buyers appropriately have near zero confidence in CMBS instruments. Any regulation might be a good first step since self regulation didn´t work, but so far absolutely no action has been taken. And you don´t get a good feeling when you read stories about these new Wall Street securitization forays and realize banking lobbyists pour money into the campaign war chests of congressmen and senators at record rates. It´s like the fix will be in and when markets recover-any regulation will be window dressing, Wall Street will soldier on, and we´ll be on our way to another fiasco.