If you’re like me, then you’re having a hard time grasping all (any?) of the moving pieces of our financial crisis. Is the bailout good or bad? Do we even need it? How did we get here? What’s my name again?
My understanding has been helped tremendously by two episodes of NPR’s This American Life. The first, which originally aired back in May, is The Giant Pool of Money that explains problems we are seeing in the housing market. The second, which aired this week, is Another Frightening Show About the Economy that looks specifically at the credit crisis and the bailout package that was just signed into law.
Both programs go into enough detail to accurately describe each situation but also take the time to explain terms and concepts that are not familiar to most of us. I give them my highest recommendation.
I loved Giant Pool of Money.
I think it is easy to say that this was caused by greed, but really I think it was caused by people trying to satisfy their customers..
Investing Customers needed someplace to put their money, and as a result there was a huge demand for Mortgage Securities to invest in, and in order to get enough mortgages to securitize, underwriting guidelines where loosened and loosened.
Traditionally investors would invest in treasury bonds, but rates had been held down for so long that these where not worth investing in, and Mortgages had always been the next best thing.
Layers and layers insulate the investor from the investment, and irrational choices happen at each layer. Each layer tries to do it’s best to look out for it’s interest and it’s customer’s interest, but doesn’t think about it’s customers customer that much. (I think this is one of the problems with Health care too)
I look forward to hearing the new one.
Both shows were great. Reminds me of the line from the movie:
“Be afraid. Be very, very afraid.”
The second show was informative and scary, but I loved how they ended with the Carter Family’s ‘No Depression.’