Let's just call them garbage mortgages
TEXT OF INTERVIEW
Scott Jagow: We've probably used the word subprime on this program just about every day for the past few weeks, but Allan Sloan of Fortune Magazine thinks maybe we should call these loans something else.
Allan Sloan: Well subprime sounds like a little bit less than the rest but basically OK. And if you've done what I've started to do lately and look at some of these mortgages we're talking about and look how they were bought and sold and created into securities and sliced and diced, you come away with a sense of complete horror, especially as an English major. Because stuff that was really garbage or trash or words that I don't dare use on this program somehow ended up being rated AAA by rating agency geniuses, which meant that buying a piece of a mortgage where there was almost no way the buyer was ever gonna pay was supposed to be as safe for the buyers as owning a U.S. Treasury bond.
Jagow: So you think if they were called "trash mortgages" or "garbage mortgages" that would have made a difference?
Sloan: Sure, maybe all of these people who were buying securities based on these might have had a little hesitation. But subprime, it's just such a nice word. I mean it's so clean, Scott.
Jagow: It's kind of like pre-owned instead of used.
Sloan: That's right! Right a pre-owned mortgage.
Jagow: Allan do you think that this subprime mess has taught anybody anything or are we doomed to repeat this?
Sloan: Oh no, it hasn't taught anybody anything. Scott, I've been doing this for 40 years and every eight or 10 years, there's some new I'm putting the word crisis in quotes in the finaicial markets because somebody went out and made a batch of really bad loans and was followed by everybody else. The problems used to be making loans to countries that couldn't pay, then there were real estate problems, then there were the junk bond takeovers and now we have this. I mean we won't have exactly this but we'll have a form of it.
Jagow: Forever the optimist, Allan Sloan, thanks.
Jagow: Allan Sloan is a senior editor-at-large for Fortune Magazine.