When economic historians come to write the history of this period, they will look at this and go, "My god! How did they manage to do this?" We don’t even understand the actual quantum of the problem.
Ira Glass: ...there’s this long chain of people that starts with these Wall Street guys and ends with people who stand to lose their houses. All along that chain there were bankers and brokers and investors and homeowners. Everybody deluded themselves, thinking they could throw out the old rules of banking.
Adam Davidson: Right. In all the coverage of this we hadn’t heard much from the people all along the chain. We wanted to know what where they thinking when they were doing all this? And why did they think it would work? And simply, how did it all work?
Ira Glass: So, this is what we’re devoting our program to today. From WBEZ Chicago, it’s This American Life distributed by Public Radio International. I’m Ira Glass. And today’s show is a special co-production we’re doing with NPR News - your place of employment Adam.
Adam Davidson: Very proudly so.
Ira Glass: You and Alex Blumberg are going to be explaining step by step how this all worked and we’ll meet some of the people who created this economic disaster. Let me turn the show over to the two of you, which is great for me because I’ve pretty much lost my voice anyway. Alex Blumberg will kick things off.
Alex Blumberg: The thing that got me interested in all this was something called a NINA loan. Back when the housing crisis was still a housing bubble. A guy on the phone told me that a NINA loan stands for No Income, No Asset, as in, someone will lend you a bunch of money without first checking if you have any income or any assets. And it was an official, loan product. Like, you could walk into a mortgage broker’s office and they would say, well, we can give you a 30 year fixed rate, or we could put you in a NINA. He said there were lots of loans like this, where the bank didn’t actually check your income, which I found confusing. It turns out even the people who got them found them confusing. For example, a guy I met named Clarence Nathan. He worked 3 part time, not very steady jobs, and made a total of roughly 45 thousand dollars a year roughly. He got himself into trouble and needed money, so he took out a loan against his house. A big one.
- The Giant Pool of Money
Ira Glass: Well a few months ago on our program, Alex Blumberg and NPR Economics Correspondent Adam Davidson put together an hour explaining, in terms that anybody could understand, how the sub-prime mortgage crisis happened in the first place. And after that aired we were flooded with e-mails about that show. It was all over the internet. The New York Times wrote an article about it, how helpful it was. So today we asked those guys to come back. And explain some of the things that have happened since that first show. Including, how bad are things, really? And is this bailout a good idea? It’s another frightening hour about the economy.
- Another Frightening Show About the Economy
Ira Glass: Here's what I understand, what I think most of us understand. Stock market is way down. It seems to be dropping. Banks aren't lending. Even though the government has given them hundreds of millions of dollars of our money to help them start lending again. And my life, your life, the entire economic fate of our country, and the world for the next decade depends on whether or not the United States can fix its banking system. And maybe you're on the verge of just giving up, of figuring that this is just going to be one of those news stories that you're just going to kind of sit out, you know? I sat out Kosovo. I'm not proud about that fact, but I did. Well, if that's your situation, I have good news for you. The team that put together our show explaining the mortgage crisis last year, that so many of you wrote to us to let us know that you found so helpful, is the team Adam Davidson (AD) from NPR News, NPR Economics Correspondent, and This American Life Producer Alex Blumberg (AB), they are back. They are back today, and in the next hour, they are going to explain everything you need to know to understand the U.S. Banking system and how it might, or might not be fixed. And, I've got to say, they've been working on this all week, I've heard the thing, it is awesome. It is awesome, and at the end of it, you will actually be able to have an opinion. From WBEZ Chicago, it's This American Life, distributed by Public Radio International. Today's show is another collaboration between us and NPR News. the collapse of the U.S. banking system explained in just 59 minutes.
- Bad Bank
