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P.J. O’Rourke explains collateralized debt obligations

The left has no idea what’s going on in the financial crisis. And I honor their confusion. Jim Jerk down the road from me, with all the cars up on blocks in his front yard, falls behind in his mortgage payments, and the economy of Iceland implodes. I’m missing a few pieces of this puzzle myself.

Under constant political pressure, which went almost unresisted by conservatives, a lot of lousy mortgages that would never be repaid were handed out to Jim Jerk and his drinking buddies and all the ex-wives and single mothers with whom Jim and his pals have littered the nation.

Wall Street looked at the worthless paper and thought, “How can we make a buck off this?” The answer was to wrap it in a bow. Take a wide enough variety of lousy mortgages—some from the East, some from the West, some from the cities, some from the suburbs, some from shacks, some from McMansions—bundle them together and put pressure on the bond rating agencies to do fancy risk management math, and you get a “collateralized debt obligation” with a triple-A rating. Good as cash. Until it wasn’t.

Or, put another way, Wall Street was pulling the “room full of horse s—″ trick. Brokerages were saying, “We’re going to sell you a room full of horse s—. And with that much horse s—, you just know there’s a pony in there somewhere.”

It’s from his recent column about how conservatives killed conservatism, “We Blew It”, in the Weekly Standard. Personally, I’m glad they killed conservatism, because it isn’t any better than left-liberalism. It leaves one less parasitic monster in this country to be killed, or to kill itself.

(Hat tip: Arnold Kling.)

Posted in Economics, Humor