Some random guy on the internets is blaming David Bowie for the current economic woes facing the international credit market, but surprisingly ignores his part in the loathsome metrosexuality fad.
Relatively popular British economist, Evan Davis, published an editorial in The Daily Mail detailing Bowie’s role in the economic collapse, specifically the common practice of securitizing loans.
In 1997 Bowie relinquished his royalty rights in exchange for a large cash advance.
“He thought: ‘I have a lot of money coming in over the next ten year from my back catalogue, but I’d rather have the cash now and not have to wait’,” Davis wrote in reference to Bowie’s possible state of mind at the time.
Davis contends that this unprecedented event inspired larger financial institutions to approach home mortgages in a similar “Fashion” (Turn to the left).
Shortly after, banks began bundling billions of dollars worth in mortgages and sold them to private companies, which in turn freed up more capital to lend out, thus continuing the vicious cycle.
“But then it started to go wrong,” Davis said. “As the banks were selling the loans, any bad risk became someone else’s problem, so the banks didn’t have to worry so much who they were lending to.”
Having removed risk from the equation, banks continued lending out massive sums of money to less than qualified applicants, whose loan defaults would eventually drive down the price of securities.
“No one wanted securities, their value plummeted, and the banks having bought so many, lost a lot themselves,” he said.
Now you know why we’re all screwed, if only someone could set it to comforting music, a la Schoolhouse Rock.
Tags: David Bowie, Economy