Fallout: The Financial Crisis

Credit Crisis Confusion: the one-act play

Rico Gagliano Oct 1, 2008
Fallout: The Financial Crisis

Credit Crisis Confusion: the one-act play

Rico Gagliano Oct 1, 2008


Kai Ryssdal: We read you some of our letters yesterday. Just a small sampling of the loads of e-mail we’ve gotten from people who’re really angry about this bailout or rescue package or call it what you will.

What’s not so clear to many more of you is exactly how we got here in the first place. Investigations into this crisis are beginning to show that when it came to the exotic securities at the heart of the credit freeze, not even the experts — people who were doing the buying and selling — really knew what they were getting into. So, we asked the Marketplace Players for a refresher.

Seller: [sound of door opening] All right. So glad to hear the Union of Mothers and Nurses Pension Fund is keen to invest with us, Mr. Moron.

Buyer: Actually, That’s Mah-RONE.

Seller: Oh, do pardon me.

Buyer: Happens all the time. Now, we really took a hit when Lead Paint Toyco went under, so we’d like some big, quick returns here.

Seller: Then have I got the product for you. It’s called a reverse sub-micro-standard mortgage shadow security and — do you hold a degree in rocket science?

Buyer: Nope.

Seller: Hmm. Well then, simply put, what we do is take semi-insured debts that’ve been sold to us from inelastic bubble markets, vertically resell, then unbundle the revenues according to Moody’s astro-logarithm.

Buyer: Astro …

Seller: Astro-logarithm, which gives a monetized valuation that has itself been subdivided into A-3 and G-minus pumpkin patch. You following?

Buyer: Not at all!

Seller: Great; me neither, really! This thing was invented by some eggheads we keep in a cave.

Buyer: Please, continue.

Seller: Right. So, I think the Q-grades are dumped and leveraged upwards across 25 underplummeries? Our unicorn gives it a kick, and presto: you’ve got 300 percent annual growth.

Buyer: Now, you just said “unicorn.” There is such a thing?

Seller: Uhhh. Kind of? Honestly, I don’t know. Don’t care!

Buyer: Well, you also said “300 percent.” So, I’m sold!

Seller: OK! How much you want?

Buyer: How about far more than we can afford?

Seller: [HIGH VOICE] Sweet.

Buyer: Great doing business with you, Mr. Exploiter.

Seller: Actually, that’s Ex-PLAH-tee-ay.

Buyer: Whatevs!

Ryssdal: Rico Gagliano and John Rabe were the Marketplace Players today.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.