Dear Mr. President-Elect:

The people of the United States have spoken. Their collective voice resonates loudly and overwhelmingly in praise of your vision and promises for America the beautiful.

Over the many voices, the chorus of a common refrain resounds: There is nothing we as a people cannot do if inspired by confidence in our president, honest and transparent democratic government, and equal opportunity in pursuit of our happiness.

Fundamental to our pursuit of happiness is confidence in the viability, integrity and safety of our capital markets institutions. The public’s confidence and reliance upon these institutions to create employment opportunity, to provide protection of the many from the greed of a few, and to shepherd our savings and nation’s wealth have been dangerously undermined. The internal threat to our way of life and future is the crisis of confidence we face in restoring manifest integrity, safety, and viability in our economy.

With the mandate of the people you have an opportunity to override the self interest of entrenched politicians, the inordinate influence of lobbyists and the disturbing greed of vested interests. The old walls of crony capitalism are held together by self-serving, self-policing and self-destructive regulatory bodies. The inability of the present system of regulation to deal with the complexities of expanding capitalism and protect us from inordinate concentrations of systemic risk has been tragically demonstrated. It is time that the crumbling walls of regulation are replaced with a new singular, transparent, effective and dynamic regulatory apparatus. I believe the attached outline for such an apparatus serves as a prospective model towards engineering effective regulatory architecture.

Upon your inauguration and ascendancy to the highest and most powerful office on earth, your message and promise of change will resound and echo throughout the world. There may be no better change to make than to repatriate confidence in the American capitalist model and dispel the crisis of confidence gripping our nation by immediately exercising your mandate to change the regulatory apparatus essential for economic growth. Change is your promise, and God willing, it will be your legacy.

Congratulations on achieving the American presidency. The whole world is with you.

Sincerely,

Shah Gilani

Money Morning Plan for Engineering an Effective Regulatory Architecture

[Editor’s Note: Money Morning Contributing Editor R. Shah Gilani, a retired hedge fund manager, is a noted expert on the U.S. credit crisis.]

By R. Shah Gilani

Contributing Editor

Money Morning/The Money Map Report

Overview: The United States must engineer a new transparent, non-partisan, “systemic-centric,” economy-oriented regulatory apparatus that facilitates innovation in capital formation, product efficacy, public protection and open, fair and equal market access.

I. General Architecture:

1. The United States Economic Council: Establish The U.S. Economic Council under the Executive branch. Council members will consist of:

• U.S. Treasury Secretary (Chairman of the Council).
• Chairman of the Federal Reserve Board.
• President of the New York Federal Reserve Bank.
• Comptroller of the Currency.
• Chairman of the FDIC.
• Chairman of the Federal Association of State Insurance Commissioners.
• Chairman of the U.S. Capital Markets Commission.

The U.S. Economic Council would oversee and have both approval and veto power over all rules and regulations established by the U.S. Capital Markets Commission. The Council would represent the U.S. in global regulatory agreements and disputes.

B. The United States Capital Markets Commission: Establish a six-member U.S. Capital Markets Commission, consisting of:

• Chairman of the Capital Markets Commission.
• Equity Markets Commissioner.
• Credit Markets Commissioner.
• Commodities Markets Commissioner.
• Derivatives Markets Commissioner.
• Currency Markets Commissioner.

II. Specific Guidelines:

Market Commissioners: Market Commissioners would be respected industry professionals with demonstrable records and expertise in their respective market segments. Market Commissioners would be elected by a vote of those they regulate, where eligible voters would be determined by registration of individuals pursuant to licenses to transact business in their respective market disciplines. Holders of multiple licenses in different market disciplines would be free to vote per each pertinent license.

Market Commissioner Terms and Pay: Market Commissioners terms would be for two years and staggered. Market Commissioners would be limited to two terms. Market Commissioners would not be paid but exercise their duties as public servants.

Chairman of the Commission: The Chairman of the Capital Markets Commission would be elected by a vote of the U.S. Economic Council, and would be an established and recognized “academic” who wasn’t already actively involved in any market segments, for at least five years.

Commission Chairman Terms and Pay: The Chairman would serve a four-year term. The Chairman would be limited to three terms. The Chairman’s pay would be market based.

III. Operation:

The U.S. Capital Markets Commission would blend the offices, personnel and resources of the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Industry Regulatory Authority (FINRA) and all peripheral regulatory bodies.

The Commission would have regional offices run by career-oriented regulatory professionals. Individuals holding an executive – or in any way a judicial – position with the ability to make or influence findings of guilt or innocence, or to levy any fines or penalties in any matter, before any jurisdictional body empowered by the Commission, would be ineligible to be hired or compensated by any company or individual subject to Commission rules or regulations for five years subsequent to their Capital Markets Commission employment.

The Commission would be funded by fees and transaction charges levied upon regulated companies, markets and individuals. The Commission would establish a rules-based – vs. a principles-based – architecture. The Commission would incorporate:

1. A transparency committee.

2. A products committee.

3. A ratings committee.

4. A licensed persons committee.

5. A public-trust committee.

6. A fair and orderly markets committee.

7. A systemic markets oversight committee.

8. An international regulatory coordinating committee.

The mandate of the U.S. Capital Markets Commission would be to establish market efficiencies and opportunities enforced by rules and regulations for transparency in product creation, ratings integrity, market fairness, public protection and systemic-risk mitigation.

[Editor’s Note: Nearly 3 million readers have perused Money Morning Contributing Editor Shah Gilani’s essays on the ongoing U.S. credit crisis. Earlier this year, the one-time Wall Street insider sent an open letter to U.S. Treasury Secretary Henry M. “Hank” Paulson Jr., in which Gilani detailed a bailout plan that would have cost taxpayers nothing. Readers forwarded that Money Morning plan to their congressional representatives, asking that they support Gilani’s well-crafted initiative.

Once again we’re providing an electronic list of the elected representatives – and their contact information – and urge you to support the “Money Morning Plan for Re-Engineering Financial-Services Regulation.  Just click here to get that listing of your state’s representatives.

Later this week, Gilani will host a post-Inauguration "Web summit" that talks about the pending regime change in Washington and what it means for investors in the coming months.

The session this Thursday (Jan. 22) - entitled "The Regime Change in Washington Triggers War on Wall Street" - is free of charge to investors who register in advance. It will start at 7 p.m. EST.

Those who tune in can expect to get candid insights not available on your favorite cable-TV finance show or in the business section of your local newspaper.

“Wall Street doubletalk got us into this crisis; I hear more excuses than straight talk. Most of the dialogue is noise," said Gilani, the editor of the "Trigger Event Strategist" and a commentator who is known for his deep connections inside the investment-banking world of Wall Street. "The truth may be difficult to swallow, but without hearing it, there's not much hope for finding the right way out of the maze."]

News and Related Story Links:

1.  
   • Money Morning Credit Crisis Investigation:

     Dear Hank: Here’s How to End the Credit Crisis at No Cost to Taxpayers.

   • Money Morning Deregulation Series (Part I of III):

     How Deregulation Eviscerated the Banking Sector Safety Net and Spawned the U.S. Financial Crisis.

   • Money Morning Deregulation Series Sidebar (Part IA):

     How Wall Street Manufactures Financial Services Products.

   • Money Morning Deregulation Series Sidebar (Part IB):

     How Subprime Borrowing Fueled the Credit Crisis.

   • Money Morning Deregulation Series (Part II of III):

     Only Tighter Regulation Will Stem this Crisis of Confidence.

   • Money Morning Sponsored Event Coverage (Webinar):

     Credit Crisis Expert Shah Gilani to Address Obama Stimulus Profit

No one person is responsible for the credit crisis, the failure of investment banks, the insolvency of commercial banks world-wide, the implosion of the world’s stock markets, or for leading us to the precipice of another great depression.

The truth is there were many.

Fundamental and pragmatic banking regulations, which arose from the devastating financial collapses of the Great Depression, for decades strengthened U.S. banks and capital markets, making them the twin engines of American growth and the envy of the world.

The systematic dismantling of those same regulations by greedy bankers began in earnest in 1980, peaked in 1999, and finally climaxed with an insane Securities and Exchange Commission ruling in April 2004, a final decision that paved the way for the implosion of everything regulation was designed to protect.

Just how did we get here?

Wall Street bankers, their exorbitantly well-paid lobbying army of former congressmen and former regulators, their greatly contributed-to sitting legislators and, most egregiously, the self-righteous and still mega-rich “former” Street executives have systematically eviscerated the muscle and bones from the regulatory bodies charged with protecting us from banks’ self-destructive greed. An inordinately powerful group of executive insiders from the once-deeply respected House of Goldman Sachs (GS) have served as U.S. Treasury secretaries and in innumerable other administrative capacities.

A Reflection on Reform

The Depository Institutions Deregulation and Monetary Control Act of 1980, signed into law by President Jimmy Carter, was the first major reform of the U.S. banking system since the Great Depression.

While touted as a boon to consumers, the law was actually a gold mine for bankers. Among other requirements and banker “gifts” the 1980 Act’s provisions:

• Lowered the mandatory reserve requirements banks keep in non-interest bearing accounts at U.S. Federal Reserve banks.
• Established a five-member committee, the Depository Institutions Deregulation Committee, to phase out federal interest rate ceilings on deposit accounts over a six-year period.
• Increased Federal Deposit Insurance Corp. (FDIC) coverage from $40,000 to $100,000.
• Allowed depository institutions, including savings and loans and other thrift institutions, access to the Federal Reserve Discount Window for credit advances.
• And pre-empted state usury laws that limited the rates lenders could charge on residential mortgage loans.

In 1980, in a virtual landslide, Ronald Reagan was elected and grabbed the conservative mantle. A year later, the shock troops of the heralded Reagan Revolution launched their attack and embarked on a massive, systematic de-regulatory campaign.  President Reagan’s first treasury secretary, former Merrill Lynch & Co. Chief Executive Officer Donald T. Regan, became chairman of the Depository Institutions Deregulation Committee.

In a burst of deregulatory bravado in 1982, Treasury Secretary Regan ushered through the Garn-St. Germain Depository Institutions Act. Key provisions of the Act ultimately coalesced with Treasury Secretary Regan’s protection of the lucrative “brokered deposits” business, in which Merrill was a major player, and paved the way for the future collapse of the savings and loan industry.

Some of the provisions in that 1982 Act would later be blamed for thousands of bank failures. The provisions permitted the following:

• Allowed savings and loans to make commercial, corporate, business or agricultural loans of up to 10% of their assets.
• Authorized a capital assistance program – the “Net Worth Certificate Program” – for dangerously undercapitalized banks, under which the Federal Savings and Loan Insurance Corp. (FSLIC) and the FDIC would purchase capital instruments called “Net Worth Certificates” from savings institutions with net worth/asset ratios of less than 3.0%, and would theoretically later redeem the certificates as these shaky banks regained financial health.
• And, most frighteningly, raised the allowable ceiling on direct investments by savings institutions in nonresidential real estate from 20% to 40% of assets.

The history of S&L greed and fraud – which resulted from brokered deposits and deregulation – wasn’t forgotten by legislators. But it was steamrolled by bankers pursuing an even greater unshackling of the regulations that constrained their ambitions.

Shattered Glass

The ultimate prize was to be the undoing of the Glass-Steagall Act of 1933. Glass-Steagall, officially known as the Banking Act of 1933, mandated the separation of banks according to the types of business they conducted. Investment banks, whose securities related activities resulted in relatively large risks, were to be separate from commercial banks, whose depositors needed greater protection. The Act created deposit insurance and the government wasn’t about to allow taxpayer-backed insurance of commercial bank deposits to be exposed to securities related risks. It was a prudent and sensible separation. Bankers tried for years to undermine and overturn Glass-Steagall, but it took time.

In 1987, Alan Greenspan replaced Paul A. Volcker – the stalwart Federal Reserve Board chairman, national inflation-fighting hero and active proponent of Glass-Steagall (and now economic confidant of President-elect Obama).

In its twilight days, the Reagan administration was determined to further fertilize the seeds of deregulation and Greenspan’s Ayn Rand-inspired “objectivist,” free-market philosophies would be the perfect embodiment of the deregulatory movement.

Securitization Enters the Scene

A year later – in 1988 – two very quiet revolutions sprouted that would ultimately hand bankers twin throttles to rain terror on us all.

That year, the Basel Accord established international risk-based capital requirements for deposit-taking commercial banks. In a byproduct of the calculations of what constituted mortgage-related risk (by nature of the loans’ long maturities and illiquidity) lenders should be expected to set aside substantial reserves; however, marketable securities that could theoretically be sold easily would not require significant reserves.

To obviate the need for such reserves, and to free up the money for more-productive pursuits, banks made a wholesale shift from originating and holding mortgages to packaging them and holding mortgage assets in a now-securitized form. Not inconsequentially, this would lead to a disconnect between asset-quality considerations and asset-liquidity considerations.

Meanwhile, over at the U.S. Commodities Futures Trading Commission (CFTC), the appointment of free-market disciple Wendy Gramm, wife of U.S. Sen. Phil Gramm, R-Tex., as chairperson, would result in her successful 1989 and 1993 exemption of swaps and derivatives from all regulation.

These actions would not be inconsequential in the aforementioned reign of terror that was still to come.

In 1993, with her agenda accomplished, Wendy Gramm resigned from her CFTC post to take a seat on the Enron Corp. board as a member of its audit committee. We all know what happened there. Enron’s fraud and implosion became the poster child for deregulation run amok and ultimately helped spawn Sarbanes-Oxley legislation, which has its own issues.

The constant flow of money to lobbyists and into legislators’ campaign coffers was paying off for the banking interests. The Fed, under Chairman Greenspan, was methodically deconstructing the foundation of Glass-Steagall. The final breaching of the wall occurred in 1998, when Citibank was bought by Travelers. The deal married Citibank, a commercial bank, with Travelers’ Solomon, Smith Barney investment bank and the Travelers insurance business.

There was only one problem: The deal was clearly illegal in light of Glass-Steagall and the Bank Holding Company Act of 1956. However, a legal loophole in the 1956 BHC Act gave the new Citicorp a five-year window to change the landscape, or the deal would have to be unwound. If aggressively flouting existing laws to pursue a personal agenda isn’t a perfect example of bankers’ hubris and greed, then maybe I’ve just got it all wrong.

Phil Gramm – the fire breathing free-marketer, Texas senator, and chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs – rode to the rescue, propelled by a sea of more than $300 million in lobbying and campaign contributions. In 1999, in the ultimate proof that money is power, U.S. President Bill Clinton signed into law the Gramm-Leach-Bliley Financial Services Modernization Act, at once doing away with Glass-Steagall and the 1956 BHC Act, and crowning Citigroup Inc. (C) as the new “King of the Hill.”

From his position of power, Sen. Gramm consistently leveraged his Ph.D in economics and free-market ideology to espouse the virtues of subprime lending, where he famously once stated: “I look at subprime lending and I see the American Dream in action.”

If helping struggling borrowers pursue their homeownership dreams was such a noble cause, it might have been incumbent upon the senator to not block legislation advocating the curtailment of predatory lending practices. From 1989 through 2002, federal records show that Sen. Gramm was the top recipient of contributions from commercial banks and among the top five recipients of campaign contributions from Wall Street. [Click here to read "How Subprime Borrowing Fueled the Credit Crisis."]

 Since moving on from the Senate in 2002 to mega-universal Swiss banking giant UBS AG (UBS), where he serves as an investment banker and lobbyist, Gramm makes no apologies. “The markets have worked better than you might have thought,” he has been quoted as saying. “There is this idea afloat that if you had more regulation you would have fewer mistakes. I don’t see any evidence in our history or anybody else’s to substantiate that.”

The “New” Math

On April 28, 2004, in a fitting and perhaps flagrant final act of eviscerating prudent regulation, the SEC ruled that investment banks may essentially determine their own net capital. The insanity of that allowance is only surpassed by the fact that the SEC allowed the change because it was simultaneously demanding greater scrutiny of the books and records of what were the holding companies of investment banks and all their affiliates.

The tragedy is that the SEC never used its new powers to examine the banks. The idea was that Consolidated Supervised Entities (CSEs) could use internal models to determine risk and compliance with net capital requirements. In reality, what the investment banks did was essentially re-cast hybrid capital instruments, subordinated debt, deferred tax returns and securities with no ready market into “healthy” capital assets against which they reduced reserve requirements for net capital calculations and increased their leverage to as much as 30:1.  [Click here to read "How Wall Street Manufactures Financial Services Products," an insider's look at how greed on Wall Street results in unscrupulous investment instruments]

When the meltdown came the leverage and concentration of bad assets quickly resulted in the shotgun marriage of insolvent Bear Stearns Cos. to JP Morgan Chase & Co. (JPM), the bankruptcy of Lehman Brothers Holding (LEHMQ), the sale of Merrill Lynch to Bank of America Corp. (BAC), and the rushed acceptance of applications by Goldman and Morgan Stanley (MS) to convert to Bank Holding Companies so they could feed at the taxpayer bailout trough and feast on the Fed’s new Smörgåsbord of liquidity handouts. There are no more CSEs (the SEC announced an end to that program in September). The old investment bank model is dead.

The motivation for bankers to undermine and inhibit prudent regulation is inherent in banker compensation incentives. The September 1993 Journal of Financial Research sums up the problem on compensation by concluding: “Firm characteristics that influence managerial compensation include leverage (as a measure of observable risk) market-to-book ratio of assets, size and shareholder return. Evidence suggests that Bank Holding Companies may be exploiting the deposit insurance mechanism because leverage is a significant factor in our results for incentive-based components of compensation. Our results strongly support the view that fundamental shifts in business activities of Bank Holding Companies have influenced their compensation strategies”.

No one would tempt an alcoholic by putting one in charge of a liquor store and neither would anyone put a fox in charge of a henhouse. So why are greedy bankers being allowed to rewrite banking regulations to enrich themselves while leveraging taxpayers, destroying trillions of dollars of hard-earned savings and sinking us into a potential depression?

Until transparency sheds light on the backroom dealers and influence peddlers that aligned with Wall Street against Main Street, we will continue to be held hostage to the same greed and avarice that manifests itself in too many human beings who actually have the power to execute their personal agendas.
This is the story of how we got here. Where we are is actually even scarier than authorities are willing to admit. In the second article in this three-part series later this week, I will be the unfortunate bearer of the news of where “here” actually is.

[Editor's Note: Money Morning Contributing Editor Shah Gilani, a retired hedge-fund manager and noted expert on the global financial crisis, will host a post-Inauguration "Web summit" that talks about the pending regime change in Washington and what it means for investors in the coming months.

The Jan. 22 session - entitled "The Regime Change in Washington Triggers War on Wall Street" - is free of charge to investors who register in advance. It will start at 7 p.m. EST.

Those who tune in can expect to get candid insights not available on your favorite cable-TV finance show or in the business section of your local newspaper.
"Wall Street doubletalk got us into this crisis; I hear more excuses than straight talk. Most of the dialogue is noise," said Gilani, the editor of the "Trigger Event Strategist" and a commentator who is known for his deep connections inside the investment-banking world of Wall Street. "The truth may be difficult to swallow, but without hearing it, there's not much hope for finding the right way out of the maze."

Gilani will show investors how to interpret recent moves by lawmakers and their cronies to unlock the credit markets, and what's really behind the recent machinations taking place in the power alleys of Wall Street and in the halls of government down on Capitol Hill. With this insight, investors will be able to proactively strengthen their investing portfolios in the face of an escalating credit crisis and deteriorating financial markets - whose ripple effects are only now manifesting themselves in Europe, India and other markets abroad. Investors should sign up early; those who do will be able to also submit questions in advance for Gilani's consideration. Click here for more information, including instructions on how to sign up for the free web summit.]

News and Related Story Links:

• Whitehouse.gov:
  Jimmy Carter.
• Whitehouse.gov:
  Ronald Reagan.
• Wikipedia:
  Donald T. Regan.
• Wikipedia:
  Garn-St. Germain Depository Institutions Act.
• Investordictionary.com:
  Brokered Deposits.
• Investopedia.com:
  Glass-Steagall Act of 1933.
• Wikipedia:
  Ayn Rand.
• Wikipedia:
  Basel Accord.
• Wikipedia:
  Phil Gramm.
• FDIC.gov:
  Bank Holding Company Act of 1956.
• Wikipedia:
  Sarbanes-Oxley.
• Wikipedia:
  Gramm-Leach-Bliley Financial Services Modernization Act
• Wikipedia:
  Bank Holding Cos.
• Money Morning Special Investment Research Report:
  International Investing: Why U.S. Investors are “Boxed Out” of Big Global Profits.
• Money Morning News Analysis:
  Bank of America, Wells Fargo and PNC End 2008 by Closing Major Buyout Deals.

Once upon a time, generous-minded social engineering resulted in the Community Reinvestment Act, which forced banks to lend to disadvantaged borrowers who otherwise couldn’t get mortgages to buy homes.

But because these potential borrowers were financially disadvantaged, they also represented a bigger credit risk. Banks didn’t like being told to make mortgages to high-risk borrowers because they wouldn’t be able sell these loans off to anyone else.

Fannie Mae (FNM) and Freddie Mac (FRE) were mandated to insure these higher-risk loans so that with a de facto government guarantee these "subprime" mortgages could be repackaged and sold, removing them from the inventory of the originating bank.

Thus the seeds of the subprime mortgage debacle were planted.

A series of devastating events – the bursting of the tech stock bubble in 2000, the 2001 terrorist attacks on U.S. soil, and the war on Iraq and the spike in oil prices, to name the key ones – posed serious recessionary threats.

The U .S. Federal Reserve aggressively lowered interest rates to stimulate the economy. A long period of low rates reduced returns for investors, but simultaneously afforded borrowers cheap financing. Wall Street went to work manufacturing all manner of products to squeeze extra yield out of this ultra-low-interest-rate environment.

Subprime collateralized mortgage-backed loans, similarly structured and packaged commercial mortgage-backed loans, leveraged corporate loans, and derivatives (especially credit default swaps), were manufactured in massive quantities.

Many of the products were rated investment grade by the major ratings agencies, which were incongruously but handsomely paid by the manufacturing banks to rate their products. Higher ratings meant easier sales and greater profits.

Buyers of the products, including the banks themselves, used cheap financing to leverage returns by borrowing from each other to create and buy more and more products.

Low interest rates were driving homebuyers to banks and mortgage finance companies, most of which were offering cheap "teaser" rates and no-document "liar loans" – all in a mad rush to capitalize on what was actually a rapidly inflating housing bubble.

Consumers were flush with credit and used it, as Wall Street took credit card receivables, packaged them into pools, sold them, and gave the proceeds back to credit card issuers, who then offered the public even more credit in a competitive horn of plenty. Then the housing bubble burst, and the music stopped. Banks were afraid to lend because they had lent too much to too many suspect borrowers, including each other, meaning their collateral was depreciating faster than any econometric model had ever calculated.

As banks’ capital evaporated, lending stopped everywhere. The securities markets imploded, leaving us in a state of suspended animation in which there’s no longer any way to borrow, produce and spend.

News and Related Story Links:

• Wikipedia:
  Community Reinvestment Act.

• Wikipedia:
  Stated Income Loans ("Liar Loans").

Wall Street bankers create products like any other manufacturer seeking to sell goods or services for a profit.

The products those bankers create are financial instruments and the services they sell include advisory services, which they provide to investors and use to sell their financial products. And being the shrewd businessmen and women they are, Wall Street’s bankers also make a habit of being both buyers and sellers of their own products. All the better to serve their customers who wish to trade their products.

The uniqueness of Wall Street’s products is that simply by buying any of their products, purchasers own an opportunity to make money. If bankers can manufacture products that have greater moneymaking potential, it stands to reason that they can sell them for a greater profit. And like in any other business, the more products and services bankers sell with higher profit margins, the more they make.

The ingenuity of Wall Street is on full display when it comes to packaging products that incorporate mortgages. Banks assemble large numbers of individual mortgages into pools and sell pieces of those pools as securities.

The buyer of one of these securities owns a piece of the cash flow that comes into the pool every month when the actual mortgage holders send in their monthly payments. In order to manufacture higher-margin mortgage-related products, bankers amassed pools of subprime mortgages, where the underlying mortgages were debts of less than high quality but where the borrowers were willing to pay higher interest to qualify for that mortgage.

The underlying higher-interest-rate mortgages in the new pools meant that the subprime-mortgage-backed securities would pay investors a greater return, so Wall Street charged more for these products. And, in an effort to further boost the yields on these subprime-mortgage-backed securities, bankers “structured” pools into “collateralized mortgage obligations.”

Structuring is a method by which the cash flow from a particular pool of mortgages does not simply “pass through” to the investors, but is actually re-routed to different investors who pay a higher price for a preferred directed cash flow. Again, the ingenuity of these products is that they offer different potential earnings opportunities for the purchasers, and have higher profit margins for the bankers who manufacture, sell and trade them.