Published Jan 14, 2009As the worldwide recession continues to deepen, it appears one man may be to blame: David Bowie.
According to UK economic expert Evan Davies, it was the Thin White Duke who got the financial crisis ball rolling when he introduced his "Bowie Bonds," an initiative started in 1997 whereby Ziggy got his profits up front via selling bonds of his future back catalogue royalties to fans.
In economic terms, what Bowie was doing is referred to as securitization, which banks adopted when dealing with customer mortgages. In a nutshell, securitization is a process that involves pooling and repackaging cash flow, producing financial assets into securities that are then sold to investors (or at least that's what Wikipedia tells us).
Writing in Tuesday's (January 13) Mirror newspaper, Davies said of Bowie Bonds: "The banks were catching on to the idea. They thought, 'We have billions out there in mortgages which are going to pay us back very slowly. Why don't we sell those and get the money now?'
"So the banks started doing what Bowie had done - in a big way."
By banks supposedly following Bowie's footsteps, it effectively made it easier for homebuyers to get a loan, even if they were often a deadbeat. Soon though, the system started to fall apart when investors were sold too many "bad risk" loans by the banks, effectively leading to one of the main reasons for the current global economic crisis.
Davies said the banks became too dependent on securitization "and then the investors decided they didn't like securities because they didn't know what was in them and the loans were often bad. No one wanted to buy securities even if the securities were pretty good.
"It was fashionable when David Bowie did it once. Ten years later it wasn't."
Now, we're not economic experts but a quick online search shows that securitization has been going on way before the mid-'90s debut of Bowie Bonds. In fact, it dates back at least to the 1970s when the U.S. Department of Housing and Urban Development created the transaction using a mortgage-backed security.
Yes, Davies could be right in his speculation that some suited-up bankers got word of Bowie's scheme and were inspired by his idea but making a direct link between the two seems a bit of a stretch, not to mention implying Bowie may have in fact started the credit crunch.
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