The Giant Pool of Money
Encyclopedia
"The Giant Pool of Money" is an episode of the radio
show This American Life
which originally aired on May 9, 2008. The episode described to a general audience the causes and factors which led to the subprime mortgage crisis
. Specifically, the show aimed to show the chain of people who were "participants up and down the subprime food chain".
The show featured Adam Davidson, a business correspondent for National Public Radio and Alex Blumberg
, a producer
for the show, interviewing and reporting on the financial crisis. Blumberg described it as trying to answer the question “why are they lending money to people who can’t afford to pay it back?”
; it was identified in passing with the global saving glut
. Davidson described it as follows:
The show begins at a black tie
gala, where an award is being presented for CDO
of the year. The show does not lay blame on the financiers directly, going so far as to say "Let me just say, they’re aware that there’s a certain irony, giving awards to the instrument that almost destroyed the world’s economy. They did consider canceling this year but it’s been a really tough year, it’s been really gloomy for them." They then proceed to the opposite end of the spectrum, with a borrower whose mortgage
is in default.
After some background on what caused a shift in capital to mortgages, which they hypothesize to be Alan Greenspan
's keeping fed funds rates low during the early 2000s, the show moves to Mike Francis, a Wall Street
financier who worked at Morgan Stanley
. From there, the show describes "another Mike", Mike Garner, who worked down the chain, at Silver State Mortgage. He described the pressures and motivations faced by mortgage salesmen. After describing that area of the chain, they moved onto a CDO investment management firm run by Jim Finkel of Dynamic Credit, LLC. Davidson through an interview with Finkel describes the nature and creation of CDOs.
After describing these market players, the show goes on to discuss the nature of the speculative bubble, highlighting real estate TV shows that sprung up during the bubble, such as A&E
's Flip This House. The show then revisits some of the interviewees, describing the bursting of the bubble, both in terms of their business and personal fortunes. Blumberg and Davidson end with a prognosis of the financial system. Blumberg states "there's more talk that the next few years will feel like the 1970s. There are lots of technical differences between this crisis and Jimmy Carter's malaise. But for the average person, it could feel the same."
for the episode, calling it "impressive for the arresting clarity of its explanation of the financial crisis we're in, and even more so for its having aired so early - May 2008."
A fifth episode entitled "Return to the Giant Pool of Money" was aired on September 25, 2009. Davidson and Blumberg have also gone on to work with other NPR reporters on a regular podcast covering economics, global finance, and other business topics using similar storytelling techniques: NPR's Planet Money
.
Radio
Radio is the transmission of signals through free space by modulation of electromagnetic waves with frequencies below those of visible light. Electromagnetic radiation travels by means of oscillating electromagnetic fields that pass through the air and the vacuum of space...
show This American Life
This American Life
This American Life is a weekly hour-long radio program produced by WBEZ and hosted by Ira Glass. It is distributed by Public Radio International on PRI affiliate stations and is also available as a free weekly podcast. Primarily a journalistic non-fiction program, it has also featured essays,...
which originally aired on May 9, 2008. The episode described to a general audience the causes and factors which led to the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
. Specifically, the show aimed to show the chain of people who were "participants up and down the subprime food chain".
The show featured Adam Davidson, a business correspondent for National Public Radio and Alex Blumberg
Alex Blumberg
Alex Blumberg is an American producer for the public radio and television versions of This American Life.- Career :Blumberg is an adjunct professor of journalism at Columbia University. Since 1999 he has been a producer for the public radio show This American Life and his stories are regularly...
, a producer
Radio producer
A radio producer oversees the making of a radio show. There are two main types of producer. An audio or creative producer and a content producer. Audio producers create sounds and audio specifically, content producers oversee and orchestrate a radio show or feature...
for the show, interviewing and reporting on the financial crisis. Blumberg described it as trying to answer the question “why are they lending money to people who can’t afford to pay it back?”
Content of the show
The episode's name "The Giant Pool of Money" is derived from the description used in the show of fixed-income securitiesFixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....
; it was identified in passing with the global saving glut
Global saving glut
Global saving glut is a term coined by Ben Bernanke in 2005. The term describes a situation in which there are worldwide too many savings with respect to investment opportunities. On a national level a saving glut creates the tendency for savings to finance current account deficits instead of...
. Davidson described it as follows:
- Most people don’t think about it but there’s this huge pool of money out there, which is basically all the money the world is saving now. Insurance companies saving for a catastrophe, pension funds saving money for retirement, the central bank of England saving for whatever central banks save for. All the world’s savings.
The show begins at a black tie
Black tie
Black tie is a dress code for evening events and social functions. For a man, the main component is a usually black jacket, known as a dinner jacket or tuxedo...
gala, where an award is being presented for CDO
Collateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...
of the year. The show does not lay blame on the financiers directly, going so far as to say "Let me just say, they’re aware that there’s a certain irony, giving awards to the instrument that almost destroyed the world’s economy. They did consider canceling this year but it’s been a really tough year, it’s been really gloomy for them." They then proceed to the opposite end of the spectrum, with a borrower whose mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
is in default.
After some background on what caused a shift in capital to mortgages, which they hypothesize to be Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
's keeping fed funds rates low during the early 2000s, the show moves to Mike Francis, a Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
financier who worked at Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
. From there, the show describes "another Mike", Mike Garner, who worked down the chain, at Silver State Mortgage. He described the pressures and motivations faced by mortgage salesmen. After describing that area of the chain, they moved onto a CDO investment management firm run by Jim Finkel of Dynamic Credit, LLC. Davidson through an interview with Finkel describes the nature and creation of CDOs.
After describing these market players, the show goes on to discuss the nature of the speculative bubble, highlighting real estate TV shows that sprung up during the bubble, such as A&E
A&E Network
The A&E Network is a United States-based cable and satellite television network with headquarters in New York City and offices in Atlanta, Chicago, Detroit, London, Los Angeles and Stamford. A&E also airs in Canada and Latin America. Initially named the Arts & Entertainment Network, A&E launched...
's Flip This House. The show then revisits some of the interviewees, describing the bursting of the bubble, both in terms of their business and personal fortunes. Blumberg and Davidson end with a prognosis of the financial system. Blumberg states "there's more talk that the next few years will feel like the 1970s. There are lots of technical differences between this crisis and Jimmy Carter's malaise. But for the average person, it could feel the same."
Reception
The show was well received by listeners, stimulating ten times more listener feedback than average, all of it positive according to reporter Adam Davidson. In February 2009, Adam Davidson and Alex Blumberg were awarded the Polk Award for the episode. Chicago Public Radio's This American Life and National Public Radio, News Division won a Peabody AwardPeabody Award
The George Foster Peabody Awards recognize distinguished and meritorious public service by radio and television stations, networks, producing organizations and individuals. In 1939, the National Association of Broadcasters formed a committee to recognize outstanding achievement in radio broadcasting...
for the episode, calling it "impressive for the arresting clarity of its explanation of the financial crisis we're in, and even more so for its having aired so early - May 2008."
Continuing coverage
The same team of producers have created three followup episodes to "The Giant Pool of Money" as "Your Guide to the Meltdown". On October 3, 2008, This American Life broadcast "Another Frightening Show About the Economy", examining what regulators could have done to prevent the economic crisis. "Bad Bank" aired February 27, 2009, explaining insolvent banks and toxic assets. Finally, on June 5, 2009, "The Watchmen" aired and examined role of Congress and regulators since the creation of the American financial system in the 1930s.A fifth episode entitled "Return to the Giant Pool of Money" was aired on September 25, 2009. Davidson and Blumberg have also gone on to work with other NPR reporters on a regular podcast covering economics, global finance, and other business topics using similar storytelling techniques: NPR's Planet Money
Planet Money
Planet Money is an American podcast and blog produced by NPR. The podcast launched on September 6, 2008 to cover the global financial crisis of 2008–2009 in the wake of the Federal takeover of Fannie Mae and Freddie Mac. It was created after the success of "The Giant Pool of Money", an episode of...
.