Financial industry experts are concerned that the hiring patterns of major banks are beginning to return to those of the pre-crisis boom era. Earlier last month, CitiGroup posted an advertisement seeking a new analyst to assess a new yet familiar type of security: synthetic collateralised debt obligations.
While the name may sound unusual to laymen, it’s entirely familiar to those with an understanding of the reckless and irresponsible investing that caused the 2007 and 2008 financial crisis to occur. The position, interestingly, was filled just four weeks after the remarkable advertisement was posted.
Hiring patterns may not indicate an industry-wide trend, but finance experts remain concerned that many banks could be returning to the type of crash-and-burn credit offerings that were seen during the pre-crisis boom. Many believe that other banks, such as Morgan Stanley and JPMorgan Chase, are also turning to the risky offerings.
Collateralised debt obligations have been blamed by many financial experts for the disastrous global financial crisis that has gripped the world over the past five years. The risky securities, which were falsely labelled as secure, have largely disappeared from most banks’ financial offerings since the crash.
Synthetic CDOs allow investors to make large bets on credit portfolios that range an incredible deal in terms of quality. A CDO could, for example, include reliable loans from large corporations and subprime mortgages, each divided into ‘tranches’ based on their risk and security.
These investment products were among the most devastating sold during the pre-crisis boom, costing banks billions of dollars as millions of people, unable to repay their mortgage obligations, defaulted. Despite changing the structure of many of the securities, banks may still begin to offer them to their investors.
With many countries still recovering from the fallout of the last crisis, experts in the financial industry remain concerned that banks are moving far too quickly towards another exercise in risk-taking.