Buzzword: Cockroach theory

Marketplace Staff Mar 16, 2007

The pitter-patter of little feet brings us this week’s Marketplace Money buzzword: Cockroach theory.

The cockroach theory says bad financial news travels in hoards. If you see one scary little thing, hundreds more are hiding behind the walls. This week, many subprime lenders — who loan money even to clients with lousy credit — got squished. The mortgage tracking site LenderImplode.com says 14 of them went belly-up in the last few weeks. And if cockroach theory is true, there’ll be more where they came from.

Maybe the only real estate they should have signed for . . . are roach motels. Ew!

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