The mortgage market, that had developed in the early 2000s and reached its nadir in late 2006, died. As the unfolding crisis continued, financial market participants scrambled to stave off liquidations, forestall bankruptcy, create solutions, protect balance sheets, and blame everyone else under the sun.
While watching this unfolding crisis from my unique position, I realized financial market participants used many of the strategies employed in Improvisational Theater (think Whose Line Is It Anyway and Second City). For instance, Rating Agencies (sometimes called Nationally Recognized Statistical Rating Organizations or certain choice expletives) used to use the well known Yes And! technique for rating CDOs. I remember those conversations well...
[Fictionalized Flashback to 2006]
CDO Manager: This CDO is the best ever!
Rating Agency Senior Analyst: Yes and using Credit Default Swaps (CDS) as 70% of the underlying collateral is brilliant!
CDO Manager: Yes and it's heavily weighted towards subprime and Alt-A mortgages. US mortgages NEVER EVER go bad.
Rating Agency Senior Analyst: Excellent! Yes and your back of the envelope credit models give us great confidence that the collateral you choose is only the best quality!
CDO Manager: Yes and our fees will be at the top of the received waterfall and we can trade up to 25% of the assets per year.
Rating Agency Senior Analyst: Fantastic! Yes and we know that this bond will always pay, we'll make a fat fee, and deserves a AAA rating!
[End Flashback]
This blog is dedicated to those talented individuals within improvisational theater and the financial which have taught us so much and caused to laugh, cry, and hurl obscenities.
Send me a word and I'll improvise a post.
