Toxie The Toxic Asset

National Public Radio, about which I rarely say anything good, did a series on toxic assets, bad mortages and the causes of the recession. It is an excellent series done in an interesting way that offers a snapshot of just how we got in the mess in the first place.

We have heard over and over how the mortgages that people took out on their homes were bundled together and then “sliced and diced” into bonds backed by mortgages and sold to investors world wide.

Well, a couple of NPR reporters bought one of these bonds. They paid only $1000 of their own money for it. That was a huge discount because that same bond sold originally for about $100,000 in 2005. Turns out that $1000 was too much because they lost money on it.

Although they lost money, they learned alot about their own toxic asset…which they nick named “Toxie”. Toxie was created by real people who bundled mortages on real houses whose owners in large part stopped paying their mortgages.

These bonds are the “assets” that the government bought with the Troubled Asset Relief Program, otherwise called the “Toxic Asset Relief Program”. We aren’t out of the woods on these bonds yet because even thought the government bailed out the banks many of these bonds are held by private investment firms, pension funds, and individuals like these two NPR reporters.

If you want to learn more about it go the This American Life and listen to all the podcasts.