The Giant Pool of Money

The Giant Pool of Money is an episode of the radio show This American Life which originally aired on May 9, 2008. The episode described to a general audience the causes and factors which led to the subprime mortgage crisis. Specifically, the show aimed to show the chain of people who were "participants up and down the subprime food chain." [cite news | last = Carr | first = David | title = Daring to Say Loans Made No Sense | pages = 2 | language = English | publisher = The New York Times | date = 2008-09-28 | url = http://www.nytimes.com/2008/09/29/business/media/29carr.html?pagewanted=1&em | accessdate = 2008-9-30 ]

The show featured Adam Davidson, a business correspondent for National Public Radio and Alex Blumberg, a producer for This American Life interviewing and reporting on the financial crisis. Blumberg described it as trying to answer the question “why are they lending money to people who can’t afford to pay it back?”

Content of the show

The show begins at a black tie gala, where an award is being presented for CDO of the year. The show does not lay blame on the financiers directly, going so far as to say "Let me just say, they’re aware that there’s a certain irony, giving awards to the instrument that almost destroyed the world’s economy. They did consider canceling this year but it’s been a really tough year, it’s been really gloomy for them." [cite episode | title = This American Life Episode Transcript: The Giant Pool of Money | episodelink = http://www.thislife.org/extras/radio/355_transcript.pdf | series = This American Life | airdate = 2008-5-09 | number = 355 ] They then proceed to the opposite end of the spectrum, with a borrower whose mortgage is in default.

After some background on what caused a shift in capital to mortgages, which they hypothesize to be Alan Greenspan's keeping fed funds rates low during the early 2000s, the show moves to Mike Francis, a Wall Street financier who worked at Morgan Stanley. From there, the show describes "another Mike," Mike Garner, who worked down the chain, at Silver State Mortgage. He described the pressures and motivations faced by mortgage salesmen. After describing that area of the chain, they moved onto a CDO "factory" run by Jim Finkel of Dynamic Credit, LLC. Davidson through an interview with Finkel describes the nature and creation of CDOs.

After describing these market players, the show goes on to discuss the nature of the speculative bubble, highlighting real estate TV shows that sprung up during the bubble, such as A&E's Flip This House. The show then revisits some of the interviewees, describing the bursting of the bubble, both in terms of their business and personal fortunes. Blumberg and Davidson end with a prognosis of the financial system. Blumberg states "there's more talk that the next few years will feel like the 1970s. There are lots of technical differences between this crisis and Jimmy Carter's malaise. But for the average person, it could feel the same."

Name

The name "The Giant Pool of Money" is derived from the description used in the show of fixed-income securities. Davidson described it as follows:

Most people don’t think about it but there’s this huge pool of money out there, which is basically all the money the world is saving now. Insurance companies saving for a catastrophe, pension funds saving money for retirement, the central bank of England saving for whatever central banks save for. All the world’s savings.

Notes