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The Financial Crisis...Simplified

2008-09-29 · explainer · Hank · 4:00 · watch on YouTube

Topic: Economics · mode: Comedy & performance · tags: timely hook, song or performance

Hank acts out, with a different hat for each character, a satirical and simplified account of the 2008 financial crisis: easy subprime loans, loans sold on as rated securities, short-term thinking and an expected government rescue, ending in defaults and a global recession.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — Greeting; bad hair day and bad financial day; hats for each character

  • ★★★ Hank says that, with a bad hair day and the world having a bad financial day, he will explain the recent financial crisis wearing a different hat for each character. (playful, hedged) — 00:00:07

00:00:23 — Borrower William gets a no-proof loan with no payments for two years; the lender passes it to the bank

  • ★★★ In Hank's sketch a lender says that, because house prices will keep rising, loans now go to everybody without proof they can repay. (satire) — 00:00:26
  • ★★ In the sketch the borrower, who cannot afford payments, is offered no mortgage payments for two years and assumes he will be richer and his house worth more by then. (satire) — 00:00:44
  • ★★ In the sketch the loan originator is glad he need not secure the bad loan and sends it off to the bank. (satire) — 00:01:14

00:01:20 — At the bank: selling loans as securities, triple-A and triple-B names, next-quarter thinking, the government will catch us

  • ★★★ In the sketch the bank, needing capital for more loans, sells its loans as assets, claiming they will be repaid or backed by rising house values. (satire) — 00:01:22
  • ★★ In the sketch the bank labels bad mortgages triple-A and really bad ones triple-B, and sells the worst unnamed while offering buyers really great interest rates. (satire) — 00:01:58
  • ★★★ In the sketch a banker dismisses long-term risk: the financial sector thinks only about next quarter, as its investors do. (satire) — 00:02:39
  • ★★★ In the sketch the banker says housing prices always go up and, if not, the government will catch them because if the banks go down the country goes down. (satire) — 00:02:55

00:03:06 — Two years later: borrower stops paying; investor finds the securities worthless; global recession

  • ★★ In the sketch, two years later the borrower cannot pay, finds his mortgage worth more than his house, and decides to stop paying. (satire) — 00:03:08
  • ★★★ In the sketch an investor finds his mortgage-backed securities worthless; the bank says buyers everywhere hold them and it may have triggered a global recession. (satire, hedged) — 00:03:31

Humor (dominant)

  • The lender offers a borrower who cannot afford payments two years with no mortgage payments. — 00:00:44

    “It's like a free house!”

  • The borrower explains why two years without payments is no worry. — 00:00:57

    “in two years I'll probably be, like, the CEO of my company!”

  • The bank decides how to name the really bad mortgages it is selling. — 00:02:06

    “which sounds way better than 'Really, Really Bad Mortgages'!”

  • The bank apologises to an investor whose securities are worthless. — 00:03:39

    “it's possible that we may have triggered somewhat of a tiny, massive global recession”

Mentioned

Central: 2007–2008 financial crisis

Also: credit rating · mortgage-backed security · short-termism · subprime lending · too big to fail

Also centred on 2007–2008 financial crisis: The Explain The 2008 Financial Crisis CHALLENGE! (and 7 other challenges)

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