The Financial Times led its front page with a major story today on the return of those dread words “financial innovation.”

If regulators and Congress aren’t perking up after reading this story, they’re as good as dead (the Senate has long been a sort of part nursing home, so it wouldn’t surprise me if there’s some Weekend at Bernie’s action going on in there).

The FT reports that these “schemes,” which it rightly calls them, could lower the banks’ cost of capital by up to half. Guess who’s leading the charge? Goldman Sachs—and Barclays Capital.

It’s interesting that the pink paper compares them to collateralized loan obligations and calls CLOs “discredited” products. I mean, they are in the eyes of many of us, but I’ve figured it’s just a matter of months or years before the machine gets fired back up again, with—to be sure—a few tweaks.

And that’s what’s going on here, which is why the FT gives it such prominent play (though it gives an access-journalism scoop of an upcoming G8 agriculture communiqué bigger display). Of course, the bankers say these things are different. Here’s a Barclays bigwig:

This is all about restructuring portfolios of assets to achieve risk, capital and funding efficiency in a transparent and less complex way.

Which just really sent the needle on my bullshit meter into the red. I mean, what? It’s just a way to have less skin in the game. First, it’s just another way of magically creating money. Second, “transparent and less complex”? Don’t bet on it.

As the FT quotes a rival i-banker saying “This is a system of capital arbitrage.” Meaning: “The need for capital just miraculously disappears.”

And how do they do it? By shifting risk off the balance sheet by selling “insurance” to the banks holding the assets. If you’re feeling the déjà vu here, so am I. Sort of like credit-default swaps allowed banks to “insure” risks on debt. That’s not “transparent and less complex”—it’s adding another risk factor to the equation. Investors and banks now have to be confident of the counterparty’s ability to pay if need be. Can anyone really be certain of that after AAA-rated AIG bit the dust?

As the FT’s Lex column puts it:

…One of the keys to creating a sounder banking system is increasing the quantity and quality of bank capital — which also, of course, means lower returns. Since the new schemes being developed are designed to cut the capital cost of risky assets, they potentially go against the spirit of such proposal.

I think Lex could have done without the “potentially.”

This development needs to be watched closely by the financial press to ensure the relevant regulators and policymakers watch it closely as well.

Solid journalism by the FT to bring it to our attention early.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.