Sit down, children, and I’ll tell you a tale of a special visitor that comes into your house at night. Oh, heavens no! It’s not a scary visitor..it’s the Toxic Asset Fairy, and she’s going to make all your bad investments good as new!
Long ago, in a land far, far, away, there were some people…ok, lots of people, and big corporations, that had bought a bunch of investments for a lot of money. Some of these investments were backed up by mortgages that no one was paying, and others were based on a housing bubble that had already burst. But, the people buying them didn’t care, because they were making LOTS of money, and no one was getting hurt. Then, one day the Big Bad Recession Wizard came into town and cast an evil spell that made those investments worthless.
“STOP SELLING THOSE INVESTMENTS,” he said, a with a flick of his wand, everyone was just holding all these documents, that weren’t worth the paper they were printed on. For a time, everyone was really sad. “What will we do with our pretty investments?” they cried. “We used to make 25% a year on these things, and now they’re worthless!! We’ll never be able to get rid of these things!!”
But, that didn’t stop them from trying—first they went to neighboring villages to sell them. Sure, they sold a few to people who didn’t know about the wizard’s visit, but they still had lots left over. Then, they tried to put them together into bigger packages and sell them for cheaper, but no one wanted to buy those, either. No one knew what to do, until one night, a villager decided to use his investments to prop up his pillow. “Why not,” he said as he shoved a ream of junk CMOs under his head, “these things aren’t good for nothin’ else anyway.” Well, what do you think happened?
That’s right, bright and early the next morning he woke up with a neckache. “Stupid papers!” he cried as he flung his pillow. And then he stopped. Staring back at him was a thick pile of clean new green money where his papers had been last night!!!! He pondered for a minute, then grabbed the cash and headed off to a big sale at the local electronics store. Soon, word began to get around that someone had money and was currently loading up on bargain basement flat-panel tvs. People found him, and he told them the story of how his worthless junk became money while he slept.
Well, that very night, you can bet that everyone else in town put their nasty assets under the pillows. And what did they find the next morning? What’s that–I didn’t hear you? That’s right, cash! And lots of it! Soon, they all had money and were out spending it all over the place, and the town was saved.
So what did we learn from this story kiddos? Well, if you’re a good little boy or girl and you get your hands on some worthless securities, just put them underneath your pillow and go to bed. That night, while you are sleeping, the Toxic Asset Fairy will come along, take those papers, and leave you a nice pile of cash in its place. And everyone will live happily ever after!
