There is currently a freezing of credit all around the world, which according to Adam, is something the world has never seen on this scale. The U.S. expects more than 1.1 million bankruptcies this year, twice the 2006 number. Foreclosure rates which were historically below 2%, were initially expected to go up to 12% at worst. In some mortgage pools today they are now expected to go beyond 50 percent foreclosure rates. What does this mean?
As NPR says:
"What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money."I loved this episode, mostly because I don't know anything about money. This episode broke down the financial crisis in easy-to understand chunks and charming (or sad) vignettes. If you don't have time to listen to the whole thing, or are an over-achiever, check out the transcript.
The best part of the story is when they focus on Glen Pizzolorusso.
"Glen had five cars, a 1.5 million dollar vacation house in Connecticut, and penthouse that he rented in Manhattan. And he made all this money making very large loans to very poor people with bad credit." Glen said:
"We rolled up to Marquee at midnight with a line, 500 people deep out front. Walk right up to the door: Give me my table. Sitting next to Tara Reid and a couple of her friends. Christina Aguilera was doing some, I’m-Christina-Aguilera-and-I’m-gonna-get-up-and-sing kind of thing. Who else was there? Cuba Gooding and that kid from Filthy Rich: Cattle Drive. What was that kids name? Fabian Barabia? We ordered 3, 4 bottles of Cristal at $1000 per bottle. They bring it out, you know hey're walking through the crowd, they're holding the bottles over their heads. There's fire crackers , sparklers. You know, the little cocktail waitresses. You know so you order 3 or 4 bottles of those and they’re walking through the crowd and everyone’s like: Whoa, who's the cool guys? We were the cool guys. They gave me the black card with my name on it. There’s probably 10 in existence. You know? And that meant that I spent way too much money there...Wow.
We looked at loans. These people didn't have a pot to piss in. They can barely make a car payment and we're giving them a 300, 400 thousand dollar house."
(From tomorrow's link. Stay tuned, it's awesome. )