I was trying to decide what to write about considering the cornucopia of choices thanks to the recent global economic upheaval. So I figured a review of the tumultuous events of the recent past would be in order put into fable form instead of a mundane rehash of events. (Note: any similarity to real persons, living, dead or somewhere in between, is purely coincidental).
Once upon a time in a land not so far away – let’s call that magical place, the United State of Amnesia – it was most everyone’s dream, who was fortunate enough to reside in such an enchanted land, to own their own cottage (we often refer to them as “home(s)”). For a time, due to a number of “magic potions” that were whipped-up by what appeared to be a community of “good” wizards – the Community Reinvestment Act which, lax regulation, low interest rates, an array of arrangements such as no-doc, adjustable rate mortgages and ninja loans, unscrupulous lenders, and a system generally awash with cash – made it appear as though that dream would come true for (almost) all the inhabitants of that village of 300 million. Happy Amnesians went into debt as home prices continued to pile up.
Around the same time a couple of events were taking place that very few paid much attention to, but would later have catastrophic results. One involved a group of seemingly innocuous wizards of finance from afar who were cavorting about in their structured investment vehicles, potentially infecting society by spreading their sundry communicable devices, aka financial derivatives, such as mortgage backed securities and collateralized debt obligations. In addition, unbeknownst to most – except for example, Sir Robert of Shiller – storm clouds began to build up on the horizon, which out of would eventually pour a torrent, not of rain drops, but cottage prices.
What follows is not for the faint of heart. When the storm clouds burst and cottage prices began to plummet toward earth, a chain reaction set in. The first to see their dream slip away were many of those benefiting from many of the magic elixirs listed above – subprime borrowers. Other homeowners would soon be affected as well.
And as cottage prices continued to plummett, and the diseases from the derivatives began to spread, the land suddenly found itself invaded by terrifying giant zombie banks and one more-dead-than-alive insurance giant.
Almost over night the magical landscape seemed far from enchanted and underwent events so cataclysmic, that a former chief “great” wizard, referred to by many as “The Maestro”, admitted to having an apparent philosophical flaw, and that the village’s goldsmiths (what we would consider banks) be taken over by their government. This would cause Atlas to not only shrug, but temporarily, bobble the earth.
Yet, children, before thou’st fall into despair, all was not lost after all. The newly elected Prince of the land, O’Bama heard the clarion call and gathered about him the greatest of minds and bravest of souls, who swept aside the previous regime’s ineffectual attempts to save its denizens, and working swiftly and decisively, came thundering out of their fortresses, bringing the walking-dead banks back to life, and slaying the derivatives dragon and the evil it had wrought, and as a result, calming our “bad” animal spirits and reviving our “good.” And since I’m pretty much out of room … they lived happily ever after.
Granted the last part of the story is indeed a fairy tale. And first impressions don’t exactly cause me to be terribly optimistic. Be sure to check back spring quarter to see how our fable unfolds.