Layman's Explanation of AIG vs Bear vs Lehmann
I got called yesterday from the producers of The Daily Show, who asked for an explanation of this understandable to the "lay person."
Here is what I said to them:
• Lehman Brothers was like the little kid pulling the tail of a dog. You know the kid is going to get hurt eventually, and so no one is surprised when the dog turns around and bites the kid. But the kid only hurts himself, so no one really cares that much.
• Bear Stearns is the little pyro -- the kid who was always playing with matches. He could harm not only himself, but burns his own house down, and indeed, he could have burnt down the entire neighborhood. The Fed stepped in not to protect him, but the rest of the block.
• AIG is the kid who accidentally stumbled into a bio-tech warfare lab . . . finds all these unlabeled vials, and heads out to the playground with a handful of them jammed into his pockets.
Alas, my second shot at The Daily Show, thwarted.
Previously:
Ritholtz on The Daily Show? (January 2006)
http://bigpicture.typepad.com/comments/2006/01/ritholtz_on_the.html
Wednesday, September 17, 2008 | 03:00 PM | Permalink
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Wow, The Daily Show, BR? You've officially made the big time. Please don't forget the "little people" in your ascension to fame.......
Posted by: Jeff M. | Sep 17, 2008 3:03:56 PM
LMAO. Your sense of humor Barry is right up their alley. Too bad they can't make you "financial expert". You'd be right for it.
Posted by: rj | Sep 17, 2008 3:05:27 PM
Very funny, and not so inaccurate. Actually, those answers sound a lot more like something on Colbert....
Posted by: Luisindc | Sep 17, 2008 3:10:01 PM
and will all due respect to BR, the GOVT Intervention in AIG is the Parent flushing the bio-warfare WMDs down the toilet, not realizing that they react with water and remain in the system.
thanks for this blog.
Posted by: cloudy | Sep 17, 2008 3:10:38 PM
That was both funny and an extremely clear explanation. I'm sorry they didn't use it.
Posted by: Dan | Sep 17, 2008 3:11:17 PM
Bankers, tendency to veer toward excessive behaviour and easy lending standards during boom times is as natural as college students having sex. It's just what they do. And their actions that in hindsight seem risky or stupid didn't look so foolish at the time.
More so the failure is government... when you pay someone $85K, to guard the hen house against foxes making $15M... you know that eventually you're going to have a problem.
Posted by: Mattie | Sep 17, 2008 3:11:46 PM
It's a shame your book isn't out yet, otherwise you'd be a lock for the show tonight.
Regardless, I look forward to seeing you in front of Stewart AND Colbert in November.
Keep up the good work, Barry.
Posted by: ReductiMat | Sep 17, 2008 3:13:09 PM
??
No mention of the S&P 381
or
the DOW 29 ;)
Posted by: MarkTX | Sep 17, 2008 3:17:44 PM
Pretty good one but how would you describe:
WaMu
Citi
Fannie
Freddie
MLynch
I guess I could type names all day.
Posted by: ben | Sep 17, 2008 3:21:02 PM
Drexel was the kid with the dog,
LTCM was the pyro,
and the Fed over the last ten years planted the easy money nuke mines that are now exploding
The horse was let out years ago and you can't push him back into a toothpaste tube
Good luck to all, live long and prosper
Posted by: tbapple | Sep 17, 2008 3:21:51 PM
I'm sure my couple of emails to the Colbert Report years ago went nowhere. But, I would've loved to see Colbert express his usual mock outrage at Barry's bearish sentiments a year ago before the market started collapsing. Would've been "delicious"...
Posted by: wunsacon | Sep 17, 2008 3:25:42 PM
I feel like a guy who:
- Comes onto his porch to discover my paper bag of longs is aflame and
- As I try to hedge by stomping out the flame with some shorts, I realize I picked poor longs and shorts and I'm just stepping in shit.
Posted by: wunsacon | Sep 17, 2008 3:29:25 PM
Borrowing from Atrios on AIG
"It might have been the right thing to run down to the river with buckets to collect water to throw on the burning building, but it would have been much better to have better fire codes and a functioning fire department."
Posted by: Jeffxandra | Sep 17, 2008 3:33:49 PM
One bright spot in all this is that we'll get to enjoy the presence of our baby-boomer friends in the workplace for several extra years.
Posted by: Eric | Sep 17, 2008 3:36:19 PM
Here we go again - final hour and sinking like a stone like Monday. Doesn't look good....
Posted by: Jeff M. | Sep 17, 2008 3:38:10 PM
Ben....
Freddie and Frannie would be the children that bought bad lunch meat then packaged up multiple sandwiches not realizing the poison contained within.
Posted by: April | Sep 17, 2008 3:43:06 PM
Lending Among Banks Freezes...the WSJ...Tuesday Sept 17.
http://online.wsj.com/article/SB122156888040242963.html?mod=todays_us_page_one
Bruce in Tennessee
Posted by: Bruce | Sep 17, 2008 3:45:18 PM
Another POV:
Lehman Brothers=Dennis Mitchell, "Dennis the Menace"
Bear Stearns=Rhoda Penmark, "The Bad Seed"
AIG=Damien Thorn, "The Omen"
Posted by: Winston Munn | Sep 17, 2008 3:51:03 PM
Dylan Ratigan sort of went postal on this Standard and Poor's Analyst. I actually enjoyed it. I'm not sure why we have such institutions as Standard and Poors/Moodys/Fitch....everyone of these guys who come on TV seem like 2nd and 3rd tier talent who couldn't get hired for the bigger money jobs.
It's difficult to believe there are debt buyers out there that would actually believe any of these Credit ratings without first doing there own due diligence or paying smarter people to do the analysis.
- AT
Posted by: Andy Tabbo | Sep 17, 2008 3:51:05 PM
"AIG is the kid who accidentally stumbled into a bio-tech warfare lab . . . finds all these unlabeled vials, and heads out to the playground with a handful of them jammed into his pockets."
...these kids should be sent to Juvie. Will we be so lucky?
Posted by: JoJo | Sep 17, 2008 3:56:10 PM
Wunsacon 3:19,
Good analogy. what I'm lacking in profits, I'm making up in volume, though...hahahahha
Posted by: cloudy | Sep 17, 2008 3:59:16 PM
Brilliant! And they didn't use them? More dull-witted than I'd expect from the Daily Show.
Posted by: jtil1 | Sep 17, 2008 4:00:17 PM
``The tectonic plates beneath the world financial system are shifting, and there is going to be a new financial world order that will be born of this,'' said Peter Kenny, managing director at Knight Capital Group Inc., the Jersey City, New Jersey-based brokerage that handles about $1 trillion worth of stock transactions a quarter. ``It's an ugly and painful process.''
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=abVpg8xJDMWk
March 31, 2008
Dear SIFMA-CL Member:
Please see below from Tim Ryan, CEO of SIFMA, on the Treasury Department’s “Blueprint for a modernized Financial Regulatory Structure” released today.
Below you will find:
SIFMA’s summary of the plan’s executive summary
A link to Treasury’s fact sheet on the plan
A link to the plan’s executive summary
A link to the Blueprint
A link to Secretary Paulson’s speech text
SIFMA’s public reaction from Friday evening to the expected unveiling of a plan
Contact information for SIFMA
SIFMA’s summary of the Blueprint’s executive summary
Last March, Treasury convened a blue-ribbon discussion of capital markets competitiveness. Industry leaders and policymakers alike agreed that the competitiveness of our financial services sector – and its ability to support U.S. economic growth – are constrained by an outdated financial regulatory framework...
http://www.sifmacl.org/en/art/?58
this, though:
Drexel was the kid with the dog,
LTCM was the pyro,
and the Fed over the last ten years planted the easy money nuke mines that are now exploding
The horse was let out years ago and you can't push him back into a toothpaste tube
Good luck to all, live long and prosper
Posted by: tbapple | Sep 17, 2008 3:21:51 PM
has to be one of truest things I've read on this weblog...
we've a Simple choice to mmake, going forward, sadly we're ill-prepared to make it..
Posted by: Mark E Hoffer | Sep 17, 2008 4:04:47 PM
and the FED is the crappy parent whom let the kid become so big and fat and now diabetic that letting the little monster's kidneys fail was too immoral and are now seeking redemption by putting the whole family on a diet of rice and beans until junior can talk a walk around the block without gasping for air or passing out from having to haul his own fat ass more than two feet.
Posted by: justin fallon dollard | Sep 17, 2008 4:09:30 PM
Maybe they wanted metaphors instead of similies? Sometimes it's hard to tell.
Posted by: Phil | Sep 17, 2008 4:16:59 PM
