Subprime the Musical- Series of light-hearted podcasts designed to explain the Subprime Mortgage Crisis.

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To understand where the Subprime Mortgage Crisis began, we need to start at the root of the problem and first look at global savings (or as Chicago Radio dubbed: the Giant Pool of Money). By looking at the changes in the growth of global savings and interest rates over the past decade, I explain how and why many investors started moving away from traditionally safe investment products (i.e. treasury bills) to the housing market.

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Lyrics

Let’s start at the very beginning

A very good place to start

What has happened to our dear economy?

Should we intervene or should we let it be?

Intervene?

The debate of this is what we shall do?

Let it be? Intervene?

Let it be or will it all…fail?

Subprime: a mortgage that’s caused this dread

Inflation: a time when prices rise

Stimulus: a fiscal push ahead

Slump:  a time when no one buys

Interest:  a fee for borrowed cash

Fed: adjusts the interest rates

Panic: a time before the crash

this will bring us back to

Debates

Debates

Debates

Debates

Credit

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In Act 1 Scene 2 Part 1, I give insight into the basics of the mortgage market.  Granted this is a very simplified explanation, but it gives important insight into how people who put money into savings accounts are connected to people who want to buy homes.  WARNING: In reality the mortgage market is much more complicated than this.  This video is only used to illustrate some important concepts. 

In Act 1 Scene 2 Part 2- In this podcast, I attempt to explain how the mortgage industry connects to the larger financial markets.  AGAIN I am warning you- this is all just one big simplication and I leave out a lot of important details.    This video is just used to illustrate BASIC concepts. 

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In Act 1 Scene 3 Part 1, I go into detail about how our mortgage market kind of got a little screwed up.    I offer an overview of the different types of mortgages and what factors enhanced risk in the mortgage market.

In Act 1 Scene 3 Part 2, I give insight how we developed some rather complicated mortgage products and how that played a role in contributing to the crisis. 

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Watch the inspiration

Here’s the story

Of a Subprime Borrower

Who was looking for a chance to get a home

He had bad credit

And low income

He couldn’t get a home

Here’s the story

Of an investment banker

Who had clients begging for some real high gains

T-bill rates were low

and markets were slow

It was a real big pain

Till the one time when this borrower met this banker

and they knew it was much more than a hunch

That these two could now form an agreement

That’s the way they all began the credit crunch

The credit crunch

The credit crunch

That’s the way they began the credit crunch

Credit

Act 1: Scene 4-
In this Scene, the basics of interest rates, how they work, and how the Federal Reserve is able to change them through means of the money supply.   In addition, we’ll discuss how interest rates changed over the last two decades, and how these changes may have played a part in contrinbuting to the current economic crisis.  (NOTE: I don’t get into detail about the Federal Funds or Discount Rate…I might add another podcast to explain that).

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Everytime I think of you I don’t understand

How you let this whole market get so out of hand

Things would have been better if you’ve taken a stand

Instead of following others who preach for Ayn Rand

You were once the Fed Chief who was lauded by everyone

That was till the day that the markets came undone

Did you get it wrong?

Did you get it wrong?

Did you get it wrong?

Did you get it wrong?

Only want to know…

Only want to know…

Only want to know…
 

I only want to know

Alan G., Alan G.

Tell me now what is your legacy?

Alan G., Fed Chair Chief

Why have your actions caused us such grief

Alan G. Fed Chair Chief

When should we be waiting for relief

Alan G., Fed Chair Chief

Way back in 2004, you pushed ARMS

Not know that the problems now are from where it stems

Deregulating seemed to be the answer to all

Not realizing free markets couldn’t stop their own fall

You ticked off investors when you kept down the rates

Your actions then are the subject of many debates

Did you get it wrong?

Did you get it wrong?

Did you get it wrong?

Did you get it wrong?

Only want to know…

Only want to know…

Only want to know…

I only want to know

In this podcast, I delve into a bit of legislative history dating back to the Great Depression times which separated the financial services that commercial and investment banks could provide.    Through this, I explain how changes in the late 90s reversed that and played a role in increasing risk in the financial sector. 

In this podcast, I explain our complicated regulatory system and how different financial services institutions were able to ‘select’ their regulator.  Naturally, this led to some rather serious problems…

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