The Troubling Return of Credit Bubble Factors Like CDOs

Data point No. 1: Banks are back to hawking complex derivatives that magnify bets on corporate debt. Data point No. 2: For the first time since the financial crisis, JPMorgan Chase is set to resume selling securities tied to home loans that aren’t backed by the government. Add a third development—the feverish revival of the U.S. housing market, with new home sales surging to levels not seen since August 2008—and a meltdown-minded observer could reasonably get to thinking, Here we go again.

The return of financial products that played a role in the 2008 credit bubble provides a measure of how far the economy has come since then—and how tempting it is for Wall Street and investors to return to old habits. It may also provide grist to lawmakers and commentators pushing to end the “too big to fail” era and break up the big banks before they require another public rescue.