The Sub-Prime Primer

Here’s a funny 45 page slide show that explains how we got into the current financial crisis over sub-prime loans.

sub prime

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  • You done good. Funny AND informative!

  • Dan

    Interesting slides. FYI there is something screwy with slides 42-44, the Next links aren’t working correctly for me.

  • brian

    You (and every other commentator) forgot the next frame where the consumer says, “Really? That doesn’t seem right and I’m not going to be led blindly into the biggest financial decision of my life so I’m going to check into that.” Oh wait – its because that never happened.

  • David Greiman

    Worst. Drawn. Comic. Ever.

  • Plus that loan broker was getting massive kick backs for all the loans he gave because the bank would sell them in bundled securities basically putting tons and tons of thirty year loans right on the companies bottom line and not waiting the 30 years for the customer to pay, if they even could pay.

  • The sub-prime mess is REALLY a mess, isn’t it? Unfortunately, the sub-prime mess is one variable out of many: high oil prices, astronomical cost of wheat and soy and grain, and of course the housing crisis. Does anybody honestly know when this will be over? Do you think we’re in a TRUE recession at this time? Warren Buffet thinks so…

  • Andrew

    It’s interesting, and very informative, but also not complete. The bigger issue than the direct tranching was the use of default swaps. Basically, one company buys the *actual* CDO, which will vary in return rate, in exchange for a set rate of return (based, usually on LIBOR). Thus, even safe debt (like corporate debt) becomes risky based on fluctuations in the market. It wasn’t (and isn’t) all about the sale of sub-prime mortgages

  • Pavel

    …if only it weren’t true… :-(

  • tarver

    I’m a old mortgage guy and you don’t know how true that is. every lender that I dealt with encouraged me to take advantage of the lax program guidelines while they were available. 100% loan no worries, little credit no worries, little job stability no worries, they can do it all!!! yeah ok

  • Mac

    The writer forgot the part about how Congress mandated that lenders offer crappy loans to shitty borrowers so they (the Democratic Party “base”) could all be a part of the American Dream of home ownership.

  • Bob

    Um, have you ever thought you are over-simplifying things? My guess – no. And guess what – people other than just those that got sub-prime mortgages are hurting too.

  • that is witty and very informative

  • OK

    As someone that works in the mortgage industry, you have nailed it right on the head. We are all money grubbing morons that are out to screw everyone over. Way to propagate a stereotype about people that work in the mortgage industry. Oh, you forgot the part where people making slanderous (yet only half informed at best)statements in the media continues to lower general confidence in the market forcing lenders to tighten guidelines to the point where even people who can afford their homes are being screwed because they are now $100,000 upside down in their homes and took Bernanke’s advice, got into a 5 year ARM, have used up all their savings on inflated monthly payments and their families are on the verge of being out on the streets. By the way, we have families too and most of us aren’t looking to just make a quick buck. I am very good at my job and it pisses me off when people think I am a scumbag because I help people finance their homes.

  • Another take, inspired by the above:

  • Nice post, keep up the good work!

  • Thanks for the comic version of Subprime Crisis. Your post has rightly depicted the real cause of Us Subprime Mortgage Crisis. The Mortgage Lenders had become so profit hungry that they gave away mortgage loans to people with least repayment potential. Your comic representation depicted this phenomenon accurately.

  • Jeff

    I second Mac’s comment. You left out how Congression oversight of Fannie and Freddie ignored this looming crises back in 2005 when mortgage companies already felt it coming. And you left out how Congress mandated those lax guidelines.

    Unfortunately, there are people out there who lack the wisdom and disciple to spend their money wisely and save for a down-payment. A lot of that is due to bad education.

    But most of America was drunk of a lifestyle based on cash-out refi’s and HELOC’s to pay-off high-credit card dept. I was one of them. I’ve repented and amended my ways. And I’m supposedly smart enough to know better. Well, I know better now.

  • RHF

    Nicely done! It communicates the subprime problem very efficiently. Unfortunately, millions of people have been (and will be) critically injured by this fiasco. I agree with Jeff’s comment about “bad education” — we do not teach rational economics in our schools. And the borrowers and lenders of the crappy mortgages are like high-school kids at the prom where the chaperons have spiked the punch bowl with easy money and lax accounting rules. So who’s to blame — the kids who drank the punch or the chaperons (Democrats and Republicans, including the not-really-independent-Federal Reserve, and excluding a few like Ron Paul)?

    And what’s with OK, the Church Lady, above (Comments by OK, on June 6th, 2008), who is pissed off by the cartoon? Was it SATIN that made him do it?

  • Good one!

  • Thanks for sharing this idea in a different way but as few other comments shows that its good but not enough to describe what mortgage is.

  • lucyfer

    Very early on, there are key facts that are wrong in this so-called slideshow. So, it isn’t very funny after all. The fact that people think you understand it enough to make a slideshow though, now that’s funny!