The sub prime meltdown is starting to look like a re-run of the debacle.

First, we heard the hyped up story that “things are different this time”. We were supposed to believe that people with poor credit histories were capable of repaying 100 percent loans on over priced houses over thirty years. It is a claim that sounds about as plausible as the one we heard back in 2001; that the stock of companies without cash flow could keep rising forever. Then, we saw the bust. First comes declining house prices, followed by a wave of bankruptcies. Finally, financial market regulators start to examine the dubious role of the Wall Street Banks in fermenting the bubble.

The Massachusetts' securities regulator is suspicious about the now defunct sub prime lender – New Century. This week, the regulator issued subpoenas to two Wall Street investment banks – UBS securities and Bear Stearns - as part of an investigation into whether the firms' research analysis ignored sub prime lenders' mounting financial problems.

Despite the mounting and well-publicized problems of defaults and delinquencies, the investment banks continued to push out feel good outlooks on New Century. Even when New Century started to sink and could not get financing, the investment analysts were still telling anyone who listened that New Century was in great shape. For example, on March 1, Bear Stern’s upgraded New Century’s stock from “under perform” to “peer perform”. Meanwhile, on February 22, UBS upgraded New Century to a “neutral 2” rating, and advised investors to hold the stock.

Trading in New century stopped on March 12.