Boom Bust Boom Page #2

on the FICO scale. 620? that's great. No, no, no, no, no.

You see, we financial wizards reckon 850 on

the FICO scale is good. And 300 is very, very bad. You see, most people score

about 725 on the FICO scale, and I'm afraid 620

is usually our cut-off point. Oh, dear, so, I won't get

my interest on the mortgage ( laughing )

Not so fast. You could still be eligible

for a stated-income

verified assets loan. What's that? That's where you

state your income and

we verify your wealth. Well, I'm worth

one million dollars. Oh... Can you prove it? Not really. Look, we really

want your money. Uh-uh, I mean, we really

want you to have this

interest-only mortgage. So, we can go down

the stated-income,

stated-assets route. What's that? You state your income

and assets and we

don't check them. Great! Well, eh, then-then that's

all signed and sealed. Believe it or not, this scene

or something like it, must have been played out

numberless times. In 2004 to 2005, more than a third

of all mortgages were no income,

no jobs or assets, that were nicknamed

"Ninja Loan." Hiyah! Hiyah! That's what this was about. It was about forcing loans onto people who

would never repay them, who would end up

getting foreclosed, in order to earn a fee

on the origination and another fee when they

were sold to some sucker

who would take the loss. The whole thing

becomes, eventually,

a bit of a con trick because, everybody thought

that asset prices would

continue to go up. The unimaginable happened. Housing prices

started to fall. That signaled to them that

they could never pay that debt, because they were relying

on the house price to rise as we all do in these bubbles. And then, um, like a,

string of dominoes, the very risky lenders knocked over

the risky lenders, knocked over

the normal lenders, and then they

all fell apart. Ain't got no home Ain't got no shoes Ain't got no money Ain't got no class Ain't got no skirts Ain't got no sweater Ain't got no perfume Ain't got no bed Ain't got no man JONES: The banks were

taking on more and more risk, Investing in the

financial economy instead of the real economy. The financial economy,

as it's become, is essentially making

money out of money, instead of investing

in firms and companies and contributing to

the real economy. So what happened to the banks

and the insurance companies that got involved in

the subprime lending? You can think of the-the

the end of 2007. What happened? The bank starts looking

a little more carefully

at their balance sheet. They look at the assets

they got and they say, "Wow, a lot of those

assets are trash. "Okay, we know that

these things are bad, "a high percentage of them, "and, um, some of our assets "are the I-O-U's

Rate this script:0.0 / 0 votes