links and critique of the article in question as well as the Wall Street Journal article the Mother Jones author cites would take me several hours to cobble together. I'm not really in the mood to do that tonight. I would much prefer to provide facts instead of giving you a "version".
As a start though, I would point out that your statement;
They want to consolidate performing debt into legitimately high-rated securities.
dances around the major point raised, but does not grasp the situation properly.
This statement;
Then they can localize the underperforming debt and reduce the liquidity they are required to keep on hand.
Makes no sense. I'm not sure what you intend to mean by the expression "localize the underperforming debt" and you follow it up with a misuse of the term "liquidity". That tells me the task of providing you an understandable explanation for what it is the "banksters" are trying to do is a daunting one.
I'm not trying to be glib here, nor am I trying to insult your intelligence. However, what has become clear to me regarding many of these types of stories is that often the author of a given article does not understand completely the subject on which he is commenting. I think this is definitely the case with Mr. Kevin Drum of Mother Jones. In his piece he quotes from and links to a
Wall Street Journal article which goes into some detail on the subject matter. I think it is important to carefully read the WSJ piece and understand what is being said instead of simply jumping on a "The crooks are at it again" bandwagon that is by now, completely overcrowded.