In 2k1 the Fed did intervene
And low’r’d the int’rest rate to depths obscene.
To 1 percent did Greenspan set the banks
To fix us after all the dot-coms tanked.
At 1%, as you all doubtless know,}
Paying off a debt is a free throw,}
And mortg’ges can be had by all Joe Blows. }
The banks knew this; they opened up their vaults
And loaned their loans to borrowers with faults.
Have you had problem credit in the past?
Declared bankruptcy? Payment deadlines passed?
No worries, buddies, mortgages are yours!
At these rates you can pay them through your snores.
And thus did every willing sap get paid,
And each one bought a house, and homes were made.
Construction projects sprang up like a virus
To feed the rich American desirous.
A miracle occurred, in th’eyes of banks:
The default rates di’nt overflow their ranks.
Americans, it seemed, could all afford,
Their new financial burdens, and prob’ly more!
What untapped mother lode had they unearthed?
These subprime borr’wers had financial worth!
And so it seemed, and so the lenders sought
To loan out cash till everyone was bought.
And people borrowed! They could see no harm!
The market was hotter than hot or hotly-warm.
In time their houses surely would age well,
And they’d all profit nicely when they’d sell.
But right around this time, th’American nation
Was thrust into the throes of high inflation.
The dollar, once the stalwart of the world,
Was into th’toilet rigorously hurl’d.
Now Greenspan and the Fed did all they knew,
And raised the interest rate a point or two,
And higher still, to keep our cash alive,
They pegged the interest rate around a 5.
At 5 percent the subprime owners knew
That again they’d miss a house payment or two.
And people lost their homes and moved away,
It hurt, but th’economy’d be okay.
That is, unless the bankers had got grabby,
And came up with a scheme that turned out shabby.
(Of course, they did. A banker’s never happy.)
The risks involved with subprime debt were high,}
But nonetheless the banks agreed to try}
To sell their debts to anyone who’d buy.}
A mortgage bond is what a bank will call
A share of th’loans which drove suburban sprawl.
You buy a bond from some financing bank,
And make a profit if the loans don’t tank.
And so these bonds were sold most everywhere,
And index funds and hedge funds took a dare.
And mortgage bonds were sold to such ‘n array,
That no one knows who owns the risks today.
And soon the giant banks who drive the planet
Were paving o’er their vaults with so much granite.
For who would lend a trillion dollars to
A bank that might be dead before they knew?
At this the lending rates climbed into space,
And banks are closing up in poor disgrace.
The Fed has tried to pour cash on the fire,
That helps, but now inflation will be higher.
What’s worse? we ask, A million houses lost?
Or bankers’ greed like shrouds upon us toss’d?
There is no debt that pays back what it took,
And a banker’s not a banker, but a crook.