Saturday, January 24, 2009

Origins of the Banking Crisis

Pundits routinely trace the roots of the financial system's current tailspin to the sub-prime mortgage boom of the past several years.

Ogden Nash foresaw elements of this crisis germinating over a half century ago. Bankers were a favorite Nash target. In a 1956 issue of the New Yorker, Nash lampooned the banking industry for transforming themselves from sage pillars of savings into financial hucksters.

Business Day in Australia's entitles it's article bemoaning the growth of financial derivatives, with the first two lines of Nash's poem 'Anybody for Money? Or Just Bring Your Own Basket'

Consider the banker
He was once a financial anchor...

Nash goes on to sternly admonish bankers for acting like car salesman, before concluding with:

In Nash's eyes bankers transformed themselves from cornerstones of financial common sense to "behaving so provocatively robbable." As the credit card lending crisis begins to share headlines with the mortgage crisis, we are reminded that Main Street's bank branches were the storefronts for Wall Steet's back rooms: Places where the high velocity, mind blurring complexity of the financial derivatives and securitization market melted into the toxic asset dump that Kate Jennings derides in Business Day.

There has long been a cyclical, good times, bad times pattern in banking: The 90% stock margin lending of the roaring 20's followed by the credit drought of the 1930's. The real estate boom of the 1980's and the ensuing S&L crisis.

As banking's cultural pendulum swings back to prudence, Nash, the former bond salesman, deserves credit for his prescient parody that, like so much of his work, used humor to gain attention for his genuine concern for society's wellbeing.

Ogden Nash poems copyright © by Linell Nash Smith and Isabel Nash Eberstadt

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