“It is the private trading of complex instruments that lurk in the financial shadows that worries regulators and Wall Street and that [has] created stresses in the broader economy. Economic downturns and panics have occurred before, of course. Few, however, have posed such a serious threat to the entire financial system that regulators have responded as if they were confronting a potential epidemic.”
—New York Times, What Created This Monster? by Nelson D. Schwartz and Julie Creswell, March 23, 2008
What began as a collapse in subprime mortgage-based securities (the result of higher interest rates…leading to programmed, but unplanned-for increases in adjustable-rate mortgage payments…leading to increased loan defaults…leading to plummeting investor confidence…leading to…) has now become a full-fledged credit contraction.
The negatives of this contraction affect both the meek and the mighty. Continue reading “Subprime Thinking”
When I left for college in 1961, I bequeathed the egg route, then at 160 dozen per week, to my younger brother Doug. He was almost 12. But when I came home for winter break, the route had declined to 100 dozen. It was too much for him to handle…not to mention the strain driving him around put on Mom, who was nine-to-fiving as a offset print worker for the Oxnard school system. There was little I could do to revive Doug’s waning business except cheerlead and chauffeur.
After many months of deliveries, most neighbors became accustomed to seeing the Cotler brothers on bicycles, towing their Radio Flyer egg wagon. A few unimaginative churls thought it insanely humorous to yell, “Hey, Eggman! Gimme two dozen!” every time we rode by, but the unpredictable wagon-chasing dog was our bête noir.
With its motto “We Sit Securely on Our Assets,” the Outhouse National Bank strove to offer the finest service to its only depositor, my 10-year-old brother Doug. It was open 24/7 for deposits, almost all of which were imprest as a result of the superior judgment of the 15-year-old employer of said brother. It was mere coincidence that said employer was also the owner of the bank.
Three weeks after 
“Hello. My name is Steve Cotler. Each week I go out to a ranch in the country and pick up fresh eggs and deliver them in this area at a price within a penny or two of store prices. Of course, these eggs are much fresher than store eggs because I pick them up and deliver them the same day. This week, as I finish my route—I deliver to Mrs. Jones across the street and Mrs. Brown down the block—I find that I have a few dozen left over. Since I only want to sell the freshest eggs, I’d be happy to offer them to you at half-price. Would you like to try some really fresh eggs?”