Word: ponzis
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Dates: during 2000-2009
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Sure enough, house prices stopped rising in 2006, and now banks and brokerages are taking huge write-downs tied to the mortgage-backed instruments that kept the Ponzi-loan machine oiled. Economists are furiously debating whether we're on the brink of a full-fledged "Minsky moment," in which lending shrinks sharply across the board. Nouriel Roubini, an NYU economist and a widely read forecaster, got a lot of attention in November by professing to see risk of "generalized meltdown of the financial system of a severity and magnitude like we have never observed before." That sounds bad. But even...
Hyman Minsky, an academic economist who died in relative obscurity in 1996 but is now the talk of Wall Street, had a colorful phrase to describe such people: "Ponzi borrowers," he called them, after the early 20th century pyramid-scheme perpetrator Charles Ponzi. Minsky argued that once banks got so sloppy that they handed out Ponzi loans, a financial crisis was inevitable...
...They saved their spare change for rainy days, didn’t get too incensed about politics, and even helped our neighbors out with the two-foot dumps of snow that make surviving Minnesotan winters a Herculean feat. They were far too sensible to fall for deceitful scams and Ponzi schemes–or so I had thought...
...structure payments that initially are significantly lower?" asks Johnson. With home values increasing by double digits annually, "people began buying houses they couldn't afford under the theory that the more house you buy, the more wealth you have once it appreciates," he says. "It's kind of a Ponzi scheme on a mass scale. But there has to be an end at some point...
...names in this up-to-date Ponzi scheme--Kenneth Lay, Jeff Skilling and Andrew Fastow, right--declined, perhaps understandably, to grant Gibney formal interviews, but not to worry: there's plenty of old video, and in it they are completely, utterly plausible, nicely turned out, easy in manner, born to lead mighty enterprises into uncharted territory...