Wednesday, April 21, 2010
Merle Hazard Explains the Financial Crisis
The WaPo is running a primer on financial derivatives today, hoping to educate the public on the complicated matters that lie at the heart of the civil suit against Goldman Sachs for securities fraud. An informed public needs a working knowledge of collateralized debt obligations, credit-default swaps, and such, in order to follow that news story.
But forget it! You'll learn less from that dry and boring - not to mention rudimentary - primer than you can learn from my favorite country singer, Merle Hazard. Merle is the only country singer to write songs about mortgage-backed securities, and his first big hit, H-E-D-G-E, will teach you about everything in that WaPo article plus more. Seriously.
Merle's website has lots more good music and financial infotainment. In particular, check his extras page for a link to an academic presentation that breaks down the lyrics of H-E-D-G-E and explains them in a less poetic but still succinct style.
Here's Merle's follow-up to H-E-D-G-E, which is about what happened to over-leveraged bond traders after their CDOs got marked down to market. And if you aren't sure what the terms 'over-leveraged' and 'CDO' and 'marked down to market' mean, then you are Merle's target audience.