I hope it wasn't my fault.
--Sheki Mbeki--
Friday, July 27, 2007
Sheki Mbeki Apologizes
The day after I posted my humorous criticism of sub-prime mortgage backed securities, the stock market fell sharply. One reason, according to experts, is the failure of sub-prime mortgage backed securities.
I hope it wasn't my fault.
I hope it wasn't my fault.
Wednesday, July 25, 2007
The Ballad of Sub-Prime Mortgage Securities
A FEW WORDS FROM PHILOSOPHER AND STAND-UP COMIC, SHEKI MBEKI
Lend money to a dead-beat you lose your money. Lend money to a few dead-beats you go broke. But lend to thousands of dead-beats, people even Tony Soprano wouldn’t fund at 20 percent a week, you bundle-up these rotten (bad doesn’t seem quite pejorative enough) debts into securities (odd name, no? should be insecurities), persuade Standard and Poorhouse to give your bundle of joy a good credit rating (not the triple oy gevalt it deserves) and sell them to the schmeggegie investor community.
They buy the package because the wrapper was so pretty they didn’t bother to look inside. Due diligence becomes “doobie doobie do diligence,” emphasis on the doobie. Now it’s no longer your problem, it’s theirs.
So why shouldn’t an investment bank (say, Stern Bears & Co.-that’s the opposite of Lax Bulls) buy up bad commercial receivables for a penny or two on the dollar, bundle them up and peddle them as “securities?”
Then come bad debt futures. Derivative you say? Damn straight! If the package some schmuck paid a thousand dollars for goes down to, say, ten cents, a wise guy who sold short makes a killing.
And, isn’t it inevitable: a bad-debt futures index. Pool the risk. If one goes down ninety-nine per cent, maybe another will go down only ninety-five per cent.
And who will police this mess? The SEC? Out to lunch. Eliot Spitzer? Sorry, he’s governor now.
Soon, the entire economy will be financed by a pyramid of moronic risks standing shakily on its point. But wait, isn’t that how it is already?
-- Sheki Mbeki--
Lend money to a dead-beat you lose your money. Lend money to a few dead-beats you go broke. But lend to thousands of dead-beats, people even Tony Soprano wouldn’t fund at 20 percent a week, you bundle-up these rotten (bad doesn’t seem quite pejorative enough) debts into securities (odd name, no? should be insecurities), persuade Standard and Poorhouse to give your bundle of joy a good credit rating (not the triple oy gevalt it deserves) and sell them to the schmeggegie investor community.
They buy the package because the wrapper was so pretty they didn’t bother to look inside. Due diligence becomes “doobie doobie do diligence,” emphasis on the doobie. Now it’s no longer your problem, it’s theirs.
So why shouldn’t an investment bank (say, Stern Bears & Co.-that’s the opposite of Lax Bulls) buy up bad commercial receivables for a penny or two on the dollar, bundle them up and peddle them as “securities?”
Then come bad debt futures. Derivative you say? Damn straight! If the package some schmuck paid a thousand dollars for goes down to, say, ten cents, a wise guy who sold short makes a killing.
And, isn’t it inevitable: a bad-debt futures index. Pool the risk. If one goes down ninety-nine per cent, maybe another will go down only ninety-five per cent.
And who will police this mess? The SEC? Out to lunch. Eliot Spitzer? Sorry, he’s governor now.
Soon, the entire economy will be financed by a pyramid of moronic risks standing shakily on its point. But wait, isn’t that how it is already?
-- Sheki Mbeki--
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