I just wrote a “heavy” post, Break Free: Afghanistan – Between a Rock and a Hard Place. So, I thought it best to write a lighter one. The following bit of thought-provoking humor occurred in an Andrew Sullivan blog post:
Young Chuck moved to Texas and bought a donkey from a farmer for $100. The farmer agreed to deliver the donkey the next day. The next day the farmer drove up and said, ‘Sorry Chuck, but I have some bad news, the donkey died.’
Chuck replied, ‘Well, then just give me my money back.’
The farmer said, ‘Can’t do that. I went and spent it already.’
Chuck said, ‘OK, then, just bring me the dead donkey.’
The farmer asked, ‘What ya gonna do with a dead donkey?’
Chuck said, ‘I’m going to raffle him off.’
The farmer said ‘You can’t raffle off a dead donkey!’
Chuck said, ‘Sure I can. Watch me. I just won’t tell anybody he’s dead.’
A month later, the farmer met up with Chuck and asked, ‘What happened with that dead donkey?’
Chuck said, ‘I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.’
The farmer said, ‘Didn’t anyone complain?’
Chuck said, ‘Just the guy who won. So I gave him his two dollars back.’
Chuck now works for JP Morgan.
I sent this off to a wall-street financial guru, and got this thoughtful reply (with a few insignificant edits):
This reminds me of securitizations. You take junk (dead donkey) and put it in something, you mix it up, slice and dice it into a CDO (Collaterialized Debt/Donkey Obligation) and magically, some triple A paper comes out of it. The buyers don’t complain, they just bought the crap (tickets) because it is rated AAA. JPM was the master of this type of securitization. So Chuck has all of the qualifications to make it big at JPM! Wall Street has been selling dead donkeys for a long time and they paid signing bonuses to people like Chuck who could find creative ways of selling dead donkeys. The $64K question: was there a donkey to begin with?! On Wall Street, in the end, they started creating securitizations from thin air. The really sad joke is some of this crap is on the Fed’s balance sheet, as revealed in documents of the Lehman bankruptcy filings and subsequent court documents.
And to further complete the picture: AIG sold CDSes (credit default swaps) on these CDOs, i.e. AIG was insuring that the “dead donkey” wouldn’t die. And, by our government’s bailout of AIG, we effectively paid off on these insurance policies.
I could have made this post part of my “Break Free” series, since our financial/economic crisis was enabled by our declining culture. But I want to leave that to a more detailed blog post on the subject.
