Out of control
James Forsyth 6:04pm
New York Magazine has a great piece this week by the man who wrote the software that so many bankers used to turn mortgages into bonds. It’s a gripping read and best summed up by his mentor telling him that the process was like putting “chicken into the grinder and out comes sirloin”.
This exchange with someone who parcelled up auto sub-prime loan illustrates how the banks hoped to make money out of sub-prime:
“Who’s paying 16 percent for a car loan?” I asked. The current loan rate was then around 8 percent.The tales of how the mortgage traders behaved shows just how out of control this world was:“Oh, people who have defaulted on loans in the past. That’s why they’re called subprime,” he informed me.
…
“But if they defaulted on loans at 8, how can they ever pay back a loan at 16 percent?” I asked.
“It doesn’t matter,” he confided. “As long as they pay for a while. With all that excess spread, we can make a ton. If they pay for three years, they will cure their credit and re-fi at a lower rate.”
“Traders had a contest. Coming in at eight, they never left their desks all day, eating and drinking while working. Then, at three o’clock, they marched into the men’s room and stood at the wall opposite the urinals. Dropping their pants, they bet $100 on who could train his stream the longest on the urinals across the lavatory. As their hydraulic pressure waned, the three traders waddled, pants at their ankles, across the floor, desperately trying to keep their pee on target.”The article and everything else you hear about this world does make you think that there is a great novel to be written about this.
Previous
TrevorsDen
March 30th, 2009 6:32pm Report this commentBarrow boys. I have been saying it for ages.
With blind men as regulators.
THX1138
March 30th, 2009 6:55pm Report this commentI'm definitely going to read that, but this VF article about the financial meltdown in Iceland is compelling reading too.
Wall Street on the Tundra
http://www.vanityfair.com/politics/features/2009/04/iceland200904
Remember Iceland was brought down by a very right wing Government enacting the very policies many on this blog would like to see on Britain.
Mazza1230
March 30th, 2009 6:59pm Report this comment"....great novel to be written about this."
Are you sure?
What can anyone (Frazer? James?.....) tell me about one of the conditions imposed by Bill Clinton in return for repealling Glass Steagall in 1999 was that some of the funds plundered from the old "High Street" banks by the "Investment Banks" HAD to be loaned to what we would now call sub-prime borrowers.....?
Chuck Unsworth
March 30th, 2009 7:19pm Report this comment@ TrevorsDen
Barrow boys have always made superb traders - I've known several. They're intuitive, fast, and have bags of energy. That's just about all you need for success in the City.
'Regulators'? Don't make me laugh.
Non Magister Mundi
March 30th, 2009 8:04pm Report this commentAnd to think: these 'masters of the universe' used to think people me like me were thick just because we couldn't get our heads around all their complex derivatives, hedges and leverages and other bits of financial leger-de-main. Yet now we are finding out that these goons were not so clever after all.
Naturam expellas furca, tamen usque recurret - as the Romans might have said.
Alf Tupper
March 30th, 2009 8:58pm Report this commentAnd even after the events of the past six months, these people go by the name of 'wealth creators'.
We are urged to understand that collectively, what they do, constitutes the goose that lays the golden egg?
Wind and piss.
Richard Timney
March 30th, 2009 10:02pm Report this commentNever quite managed two minutes myself. Got pretty close once or twice...
Fearless Frank
March 30th, 2009 10:52pm Report this commentWe had a similar game in (primary) school, only the idea was to get it over the wall (outdoor bogs didn't have a roof).
Not allowed now, of course, on the grounds of sex discrimination.
Richard Abbot
March 31st, 2009 9:42am Report this commentLiars Poker - Michael Lewis. Last times bubble but same idea.
Philip Chaston
March 31st, 2009 1:33pm Report this commentI bet they never left a tip for the cleaners. Someone should have tipped their contempt for those who cleaned up after them on their desks.
Back to top