Speaker 1: Cool Zone Media.
Speaker 2: Welcome to it could happen here podcasts where a bunch
Speaker 2: of incredibly convoluted and very silly financial instruments to shore
Speaker 2: the entire world economy. I am your host, Bia Wong,
Speaker 2: and with me today is someone who does not spend
Speaker 2: all of her time deep in the bowels of arcane
Speaker 2: bullshit written by different Federal Reserve boards, and that is
Speaker 2: Maldy Conger, who is the host of the absolutely delightful
Speaker 2: I mean, okay, I guess this is a who is
Speaker 2: really winning here kind of christ in terms of the things.
Speaker 3: Research, Yeah, you spent a lot of time reading stuff
Speaker 3: written by Federal Reserve guys. I read a lot of
Speaker 3: stuff written by guys who want to kill the Federal
Speaker 3: Reserve guys.
Speaker 4: Yeah.
Speaker 3: I still don't know what the Federal Reserve is, and
Speaker 3: I'm not gonna find out.
Speaker 2: You know, I don't actually think knowing what Federal Reserve
Speaker 2: is somehow.
Speaker 3: It doesn't change anything.
Speaker 2: And I don't think it's actually relevant to this app
Speaker 2: I mean it kind of. It's obviously it's relevant to everything.
Speaker 3: But means to say is the reason I'm here is
Speaker 3: because I don't know what the economy is, and at
Speaker 3: this point, I'm afraid to find out.
Speaker 4: And unfortunately your worst fears are happening.
Speaker 3: Don't worry. By the end of this I will not understand.
Speaker 4: I am going to attempt to explain the economy, and
Speaker 4: by by the economy, I mean shadow banking. Yeah.
Speaker 2: Also, before before I go into this, though, you should,
Speaker 2: you should listen to Weird Little Guys. It is It's
Speaker 2: it's really good. I like it all my friends really
Speaker 2: like it.
Speaker 3: Thank you.
Speaker 2: Yeah, it's somehow a nice comma kind of relaxing show
Speaker 2: about neo Nazis.
Speaker 3: So that's very chill vibes. Yeah for a show about
Speaker 3: guys who are trying to like blow up school bus.
Speaker 5: Yes, yep.
Speaker 4: So all right, you know I'm reading this. I'm looking
Speaker 4: over the script.
Speaker 2: Miraculously this isn't a wait hold on, I think I
Speaker 2: cut the part.
Speaker 4: Where people blew up school buses.
Speaker 2: There was legitimately a segment in here that I might
Speaker 2: put back in or someone blows up a school bus.
Speaker 3: But what a crossover event.
Speaker 2: Oh boy, oh boy, the Saudi is really good at
Speaker 2: that shit. It turns out, uh okay, okay, But let
Speaker 2: let's get back to the topic at hand, which is
Speaker 2: what is shadow banking, and why does it matter to
Speaker 2: all of us people who live in the normal real
Speaker 2: world and not in fake finance world.
Speaker 3: Does it have anything to do with shadow wolves? Unfortately,
Speaker 3: note what about shadow facts?
Speaker 2: Sadly, actually, there probably is a connection between the financing
Speaker 2: for the Lord of the Rings movies and shadow banking.
Speaker 4: I'm just too tired to work it right now.
Speaker 3: I've dragged us off track. We haven't even gotten on
Speaker 3: track yet. What is shadow bank?
Speaker 2: Okay, so the good news, the good news this is
Speaker 2: this is the first it's not the last piece of
Speaker 2: good news. We're gonna ge this episode, but come the
Speaker 2: definition used by most non academics is actually not that bad.
Speaker 4: There's a pretty good.
Speaker 2: It's very wishy washy because it's a congressional report and
Speaker 2: so it's specifically not supposed to be taking a stance
Speaker 2: in either direction on anything, because it's it's the Congressional
Speaker 2: Review Office, and they're supposed to be neutral, et cetera,
Speaker 2: et cetera. Allegedly, yeah, right, you know, and like obviously
Speaker 2: they're not, but like you know, it's like kind of
Speaker 2: fine congressional report on the subject, and they do the
Speaker 2: thing that almost everyone does, which is they go back
Speaker 2: to the definition created by the Financial Stability Board, and
Speaker 2: I'm just gonna I'm just gonna quote that because it's
Speaker 2: not that bad. Quote financial activities facilitated by institutions other
Speaker 2: than central banks, banks or public financial institutions.
Speaker 3: So it's banking that doesn't involve a bank. Yeah, canceled,
Speaker 3: I'm out. I'm out already.
Speaker 4: Yes.
Speaker 3: And they don't mean like me loaning you twenty dollars, no, no, no,
Speaker 3: of course not. They just mean unregulated banking. Oh yeah,
Speaker 3: which you can't legally call banking.
Speaker 2: I mean you actually can't legally call it banking. It's
Speaker 2: just things get weird really quickly.
Speaker 3: I mean, I'm not a bank understander, but I know,
Speaker 3: at least in Virginia, you can't incorporate a business that
Speaker 3: has the word bank in the title unless you are
Speaker 3: legally a bank, because that's like misleading.
Speaker 2: Yeah, I don't think they can legally call themselves a bank,
Speaker 2: but I guess you can call it banking activity.
Speaker 3: That's stupid in a matter already.
Speaker 2: Yes. Oh, you're going to get so much more mad
Speaker 2: by the end of this. So the base definition is
Speaker 2: it's not that complicated, right, It's something that does banking
Speaker 2: stuff that is legally not a bank, you know, And
Speaker 2: so we could talk about what kinds of things is this, right,
Speaker 2: it's like private equity firms, it's hedge funds, it's venture
Speaker 2: capital firms.
Speaker 3: So it's like evil stuff that ruins the world for
Speaker 3: no reason except for like ten guys make money. Yeah.
Speaker 2: But it's also you know, pension funds. It's like insurance companies.
Speaker 2: It's sovereign wealth funds, business development companies, repot markets, broker dealers,
Speaker 2: special investment vehicles, securitization vehicles, money market mutual funds, assay
Speaker 2: backed commercial paper conduits.
Speaker 3: Hey thing, bud. Most of those things you just said
Speaker 3: to me are fake and they make me upset.
Speaker 2: It's really bad.
Speaker 3: Sovereign wealth funds. Shut up, that's not that's nothing. I
Speaker 3: still you know, all these all these things are just
Speaker 3: like different ways of saying like you're poor and you're
Speaker 3: gonna die.
Speaker 4: Yeah.
Speaker 2: I mean, the funny thing is sovereign wealth fund is
Speaker 2: like kind of a less fake one in that it's
Speaker 2: like fake, Hey, this is like a fake. It's the well,
Speaker 2: it's like this is the Kingdom of Saudi Arabia has
Speaker 2: pooled all of the money it's gotten from. It's like
Speaker 2: horrific crimes and put them together into one giant thing,
Speaker 2: and that's a sovereign wealth fund.
Speaker 3: Oh so it's good, it's what you mean.
Speaker 2: No, I am a notable. There is, by the way,
Speaker 2: a camp of people who believe that sovereign wealth funds
Speaker 2: are like a social list thing and that you could
Speaker 2: use them to do socialism.
Speaker 3: I'm going to jump out the window.
Speaker 2: I think this is so stupid. Yeah, this is we
Speaker 2: haven't even gotten into the nightmare stuff. So remember I
Speaker 2: was talking about the Financial Stability Board definition in that
Speaker 2: congressional report right where it's like, okay, this is a
Speaker 2: bank that does non banking stuff or a non bank
Speaker 2: that does banking stuff.
Speaker 3: Sorry, oh, I guess we should say I guess we
Speaker 3: forgot to say at the top. The reason you're explaining
Speaker 3: shadow banking to me is because we saw an article
Speaker 3: last week that what those those not banks were putting
Speaker 3: a stop on withdrawals from their not banks and I
Speaker 3: didn't know what that meant.
Speaker 2: Yeah, that's amazingly this this is so convoluted.
Speaker 4: We're not even going to get to that this week.
Speaker 2: Right, But like that's that's why we're explaining that's why, right,
Speaker 2: there's like, yeah, there's like there was like a mini
Speaker 2: bank run going on with these like shadow banks, no
Speaker 2: stop banks. Yeah, so we're going to get into how
Speaker 2: that can happen and why. But but before we get there,
Speaker 2: we need to talk about all, right, to get a
Speaker 2: sense of the complexity of this. Right, the Congressional report,
Speaker 2: like the accepted terminology for this is not shadow banks, it.
Speaker 3: Is, right, that can't be their official name. That's not
Speaker 3: their government name.
Speaker 2: No, it's it's non bank financial intermediation.
Speaker 4: Now what the fuck is that?
Speaker 2: And this is where this episode goes completely off the
Speaker 2: rails because the components of what count as intermediation are
Speaker 2: so complicated. I am not going to try to describe
Speaker 2: it until literally the end of this.
Speaker 3: I mean, is it like what is Venmo officially? Really?
Speaker 3: Venmo's not a bank, but it provides like financial services.
Speaker 2: Actually, I it by.
Speaker 3: Because it's because it's like a financial intermediary.
Speaker 2: Right, Yeah, it might technically be a non bank. I
Speaker 2: don't know what the regulatory structure is.
Speaker 3: It's not legally about Yeah, I think I think that
Speaker 3: technically is one score one for Molie.
Speaker 2: Yeah, but okay, so this is this is gonna get
Speaker 2: really bad. Okay. So when I first started researching this episode, right,
Speaker 2: the first thing that I click on is is the
Speaker 2: Federal Reserves of how the shadow banking sector works compared
Speaker 2: to the nomal banking sector. Molly, you have seen this
Speaker 2: because I posted it as a joke in our group chat.
Speaker 2: This chart.
Speaker 4: I have like a very very large, like it is
Speaker 4: like a big, normal ass size monitor that I like
Speaker 4: to do my work on. I had to zoom in
Speaker 4: to three hundred and eighty percent just to make out
Speaker 4: the letters that label the boxes on this chart. If
Speaker 4: you want to read it, you have to zoom into
Speaker 4: five hundred percent.
Speaker 3: That doesn't seem like a well made chart.
Speaker 2: No, here's the thing, it's actually really good. It's just
Speaker 2: this complicated. I learned later from a paper by Copenhagen
Speaker 2: Business School professor Odny Helga Daughter. We're gonna come back
Speaker 2: to Hellga Daughter's work a lot in this episode, but
Speaker 2: I learned from from her because she has also experienced
Speaker 2: seeing this same chart and going what the is this
Speaker 2: fuck ass chart? I found out that the Federal Reserve
Speaker 2: recommends that in order to have the diagram be legible,
Speaker 2: you're supposed to print this chart as a three foot
Speaker 2: by four foot poster.
Speaker 3: Oh that makes sense, like meeting style. But like we're
Speaker 3: we're on easel.
Speaker 2: Yeah right, But like again, this is this is a
Speaker 2: diagram that he's just labeling the parts of the system
Speaker 2: and making and making like a line that shows how
Speaker 2: stuff moves through it.
Speaker 3: I guess I still don't know what we're talking about.
Speaker 2: Yeah, so this is what we're going to get into
Speaker 2: in a second. But first we have to talk about
Speaker 2: something even more bleak, which is that. Oh yeah, by
Speaker 2: the way, these like non banking bank things like these
Speaker 2: like all these like venture capital firms, all these hedge funds,
Speaker 2: all these fucking weird, ghoulish banks that are off banks. Uh. Yeah,
Speaker 2: they have twice as many assets than the regular banking system.
Speaker 3: Oh that doesn't seem good.
Speaker 4: Oh it's about to get worse. It's about to get worse, Molly.
Speaker 3: That's that's like saying I keep seventy percent of the
Speaker 3: food in my house outside on the porch, like it
Speaker 3: goes in the fridge.
Speaker 4: Oh oh, oh, it's so bad, it's so bad.
Speaker 2: So okay, there's a pretty good congressional report that I
Speaker 2: was talking about earlier that has this terrifying quote quote.
Speaker 2: As of twenty twenty three, the broad measured total financial
Speaker 2: assets and narrow measure assets at nbfisis.
Speaker 4: Is the shadow banks.
Speaker 2: Reached eighty five point seven trillion dollars and twenty two
Speaker 2: point two trillion dollars, respectively in the United States.
Speaker 3: But that's more than our GDP.
Speaker 4: That's almost three times our GDP.
Speaker 3: So that's a fake amount of money. Yes, that's not real.
Speaker 2: At all, but it kind of is. Right, These compared
Speaker 2: to total financial assets of thirty one point one trillion
Speaker 2: dollars at banks in the same period. So again this
Speaker 2: is this is almost three times our GDP in assets
Speaker 2: that they manage or control.
Speaker 3: So where does the money live?
Speaker 2: In a whole bunch of unbelievably calm, eluded bullshit like
Speaker 2: combinations of like loans and real estate and stuff like
Speaker 2: that real money.
Speaker 3: So like, okay, imagine this is schoolhouse rock and instead
Speaker 3: of the singing bill, you're like a dollar bill, Like
Speaker 3: where are you we are about to explain this where
Speaker 3: does the money live?
Speaker 4: Yeah?
Speaker 2: So okay, okay, we're we are about one huge paragraphs
Speaker 2: away from getting to this or like one paragraph Okay,
Speaker 2: So the other thing that's very important about this, and
Speaker 2: this is something Mollie was kind of touching out the
Speaker 2: beginning to get the appen So maybe I should have
Speaker 2: opened with this. Yeah, these people, these are the people
Speaker 2: who blew up the economy in two thousand and eight.
Speaker 3: Yeah, because they're making stuff up.
Speaker 2: Yeah, it's so, it's so bullshit, Molly, You're gonna get
Speaker 2: so mad.
Speaker 3: If this is Calvin Ball, fuck you I win.
Speaker 2: Yeah, it literally is. It's nonsense. It's gibberish. They're doing
Speaker 2: fucking betting markets with the entire world economy.
Speaker 3: Oh yeah, we can all do that now.
Speaker 2: Yeah, it's fun. It's like we now have the power
Speaker 2: to do the shit that destroyed the world economy in
Speaker 2: two thousand and eight. So that The thing about shadow banking,
Speaker 2: and the reason why it's complicated to explain is that
Speaker 2: it's a catch all term for like a million types of.
Speaker 4: Institutions that do different things.
Speaker 2: Right, the commonality they have is that they're all not
Speaker 2: regulated by the banking regulations.
Speaker 3: Right, It's like, we found a way to do financial
Speaker 3: crime that's not illegal because they forgot to make this illegal.
Speaker 2: Yeah, and you know, but but the thing is it's
Speaker 2: so embedded into the system that, like the US debt
Speaker 2: working is dependent on the shadow banks buying it.
Speaker 3: Like I don't believe in that either, So I'm good.
Speaker 4: Oh it's so fake, Molly.
Speaker 2: I'm not even going to attempt to explain what an
Speaker 2: overnight repo purchases to you, because it's the fakest thing
Speaker 2: I've ever seen. Where they make one trillion dollars exist
Speaker 2: overnight and then it stops existing at the end of
Speaker 2: the night.
Speaker 4: It's incredible.
Speaker 3: I love how much of the economy is based on
Speaker 3: guys just imagining stuff and agreeing on the thing they
Speaker 3: imagined and then trading their imaginary tokens like this is
Speaker 3: fucking Pog's.
Speaker 2: Yep, this is this, this, this is this is unfortunately
Speaker 2: what what our entire world is based on. It's so fun.
Speaker 2: Oh god, Okay, So what is actually shadow banking?
Speaker 4: I've given you.
Speaker 2: Like the broadest definition possible, which is like it again,
Speaker 2: it's the it's doing bank ship without being a bank.
Speaker 2: But let's go back to the beginning of the term,
Speaker 2: which is where most people tend to start or get
Speaker 2: to eventually. This is from an IMF paper quote. The
Speaker 2: term shadow bank was coined by economist Paul mccolly at
Speaker 2: a two thousand and seven speech at the Annual Financial
Speaker 2: Symposium hosted by the Kansas City Federal Reserve Bank in
Speaker 2: Jackson Hole, Wyoming. And basically, it's institutions that borrow money
Speaker 2: in the short term through money markets to finance long
Speaker 2: term loans. But they aren't banks, so they can't go
Speaker 2: through the FED.
Speaker 3: They're financing loans with other loans.
Speaker 4: Yeah, we're gonna so from from from a not bank.
Speaker 3: Yeah, but the big loan is from a real bank,
Speaker 3: and then the little loan is from a fake bank.
Speaker 3: Give me none of the money is read.
Speaker 2: Hold on, hold on, Okay, we're going to get there.
Speaker 2: We're going to explain this in terms of burgers. It's
Speaker 2: going to be okay.
Speaker 4: I believe in us perfect, perfect, Yes.
Speaker 2: But the other thing he describes is, and this is
Speaker 2: from Helga daughter quote in the speech, he describes shadow
Speaker 2: banking as the whole alphabet soup of leveraged up investment conduits, vehicles,
Speaker 2: and structures. So what he's talking about specifically is these
Speaker 2: are the guys who blew up the economy two does
Speaker 2: eight like these specifically, this is what he's talking about, right,
Speaker 2: These are the people who took a mortgage and then
Speaker 2: did a bunch of bullshit to it, and what's called
Speaker 2: a securitization chain. They did a bunch of bullshit to
Speaker 2: it so you could give the loan to someone else,
Speaker 2: you could sell to someone else, and this blew up
Speaker 2: the entire world economy.
Speaker 4: That's what he's talking about. He's talking about the.
Speaker 2: Banks that are not banks, the shadow banks that did
Speaker 2: all of this bullshit to turn like someone's mortgage into
Speaker 2: a fucking thing you could bet on.
Speaker 3: So selling debt is like selling the idea of future money. Yeah,
Speaker 3: and then sometimes that future money doesn't come.
Speaker 4: Yeah, so it doesn't exist.
Speaker 2: So okay, I will say, you do not need to
Speaker 2: understand this yet, because we haven't.
Speaker 4: We still have not already the actual explanation.
Speaker 3: I'm never going to.
Speaker 4: I believe in us. We can do this. It's not
Speaker 4: that bad, Okay.
Speaker 3: I'm not torturing your on purpose.
Speaker 2: I'm just no, it's okay, I believe in you. So
Speaker 2: I want to mention that I'm very indebted here to
Speaker 2: the paper I mentioned earlier from Copenhagen Business School professor
Speaker 2: Adny Helga Daughter who wrote of she wrote a very
Speaker 2: good simplified explanation of this in her Review of International
Speaker 2: Political Economy article called Banking Upside Down the Implicit Politics
Speaker 2: of Shadow Banking Expertise. But okay, as you can tell
Speaker 2: by the fact that it's called Banking upside Down the
Speaker 2: Implicit Politics of Shadow Banking Expertise, this has been when
Speaker 2: she's simplifying it. She's simplifying it from like economists down
Speaker 2: to like a political scientist or an anthropologist can understand this.
Speaker 2: I am about to attempt to simplify this down to
Speaker 2: a regular person.
Speaker 4: Can I understand this? So I'm drawing on.
Speaker 2: A lot of her stuff for the first part of
Speaker 2: this explanation, but I am I've turned it into burgers.
Speaker 3: So I'll do my best. I'm being very brave.
Speaker 4: Okay.
Speaker 2: So a shadow bank, right, it's something that does banking shit.
Speaker 4: That's not a bank. So what do I mean by
Speaker 4: banking shit?
Speaker 3: That was my next question. Yes, I think we need
Speaker 3: to start with what is a bank? Yes?
Speaker 2: So first, so okay, okay, and this is this is
Speaker 2: this is where we're starting here.
Speaker 4: What does a bank do?
Speaker 3: I put my money in it and they hold it
Speaker 3: for me.
Speaker 4: So no, actually, and this is the interesting part.
Speaker 3: No, they do stuff with it. Oh yeah, they're holding
Speaker 3: onto the promise of my money.
Speaker 2: Yeah, so okay, let's let's just let's just look at
Speaker 2: this for a second. So okay, So regular people give
Speaker 2: them money to store in the bank.
Speaker 4: This is called a deposit.
Speaker 2: The bank takes your money and loans it out right
Speaker 2: and uses that to make more money. This is how
Speaker 2: it pays you interest, right, is that it's it's taking
Speaker 2: your money and it's loaning it out to other people.
Speaker 2: It's buying things with it.
Speaker 3: That part I understand.
Speaker 2: Yeah, and this is obviously a cartoon image. And I
Speaker 2: know there's gonna be econ people who are gonna be
Speaker 2: mad at me. Look, if you understand, why.
Speaker 3: Are they listening to this? If you already know what
Speaker 3: this means, go away. This isn't for you. I'm not
Speaker 3: humiliating myself for your entertainment, Like.
Speaker 4: For the political economy people here.
Speaker 2: When I say stuff that might that's like technically kind
Speaker 2: of fuzzy.
Speaker 3: It's for me the podcast idiot.
Speaker 2: Yeah, like you you understand this, Like I work at
Speaker 2: the level of Hamburgers here, so like we have to
Speaker 2: do some abstractions.
Speaker 4: So okay, the important thing for our purposes.
Speaker 2: Right, is that there's two things here, right, There's like
Speaker 2: the deposits, the money you give them, and then there's
Speaker 2: the loans, right, and these operates on different timelines. Right.
Speaker 4: You can take the deposit.
Speaker 2: Out at any time, least in theory, but they can't
Speaker 2: get the money from the loan back at any time.
Speaker 4: Right now, This is like one of the critical things of.
Speaker 2: What a bank is is is this timeline thing. Right.
Speaker 2: It turns your your money, which you can take out
Speaker 2: at any time, into a different kind of thing, this loan,
Speaker 2: which can't be taken out immediately, right, and then they
Speaker 2: use that to make money. So this is called maturity transformation.
Speaker 2: This is a very simple concept they have made very complicated.
Speaker 2: This is one of the core aspects of that definition
Speaker 2: I was talking about earlier. This is one of the
Speaker 2: four things in it. But you now understand this. It's
Speaker 2: not that complicated. It's it's takes short term make long
Speaker 2: term and we'll get to doing the reverse in a second.
Speaker 3: Oh, I don't think it works the other way.
Speaker 4: Yeah, it's gonna go so badly. It's so badly.
Speaker 3: I don't know about bank, but just generally speaking, like
Speaker 3: in terms of time and like how like material reality works.
Speaker 3: I don't think it works the other way.
Speaker 2: It's it's not great. It's not great, Molly, it's not great. Okay,
Speaker 2: So okay. There is, however, a problem here, right, which
Speaker 2: is what happens if everyone tries to get their short
Speaker 2: term money back at the same time.
Speaker 3: I only can't, yeah, right, because you have deposit insurance.
Speaker 2: Yeah right, because the banks aren't holding short term cash.
Speaker 2: What they're holding is long term loans, and those loans
Speaker 2: like you can't pay someone alone. Well okay, Actually, this
Speaker 2: entire the crux of this episode is they find that
Speaker 2: they did do that.
Speaker 4: Yeah, yes, and it blew up the entire world economy.
Speaker 3: But if but if I wanted forty thousand dollars out
Speaker 3: of my if I had a checking out with forty
Speaker 3: thousand dollars in it, yeah, and they gave me my
Speaker 3: neighbor's mortgage as a prompt. That would worked for me.
Speaker 2: That would have worked for no fuck that, No, no, no,
Speaker 2: you need you need, you need, you need something that
Speaker 2: can buy a burger, and they're not giving you that.
Speaker 2: So okay, this is very very bad. If people try
Speaker 2: to do this, it is called a bank run. It
Speaker 2: is not good, it's bad. Yeah, And so this this
Speaker 2: blew up the entire world economy so many goddamn times
Speaker 2: that eventually we got financial regulation. Now, this this regulation
Speaker 2: requires banks to have money that is like actual cash
Speaker 2: they can hand you like right now, on hand at
Speaker 2: all times, and the government gets to and this is
Speaker 2: that's a little bit simpflication, but like, yeah, that's how it.
Speaker 3: Works, right, Like, and it's insured by the government.
Speaker 2: Yeah, I think the government will give you your money
Speaker 2: back if if the bank goes under up to like
Speaker 2: a certain amount of dollars ensured. Yep, this is this
Speaker 2: this that's that's what that means, right, the government will
Speaker 2: give you your money back.
Speaker 4: But also there's a there's a trade off to this.
Speaker 2: So this is a massive benefit for the banks, right
Speaker 2: the fact the fact that if they go under, all
Speaker 2: of their assets will be repaid by the government. It's
Speaker 2: a it's a massive benefit for them because it means
Speaker 2: that putting your money in the bank.
Speaker 4: Is like safe.
Speaker 3: Yeah, I love that for me, right, Yeah.
Speaker 4: It's good.
Speaker 2: Now, the cost to the banks is that the Feds
Speaker 2: get to see their balance sheet, right, the Feds get
Speaker 2: to see what they're doing with their fucking money, and
Speaker 2: they get to make sure that these banks aren't doing
Speaker 2: insane shit.
Speaker 3: Okay, that makes sense because they're insurance.
Speaker 2: Yeah, and that like they're not doing like unbelievably risky
Speaker 2: awful ship. And also that they're actually holding enough money
Speaker 2: to be able to pay people out right.
Speaker 3: Okay, so far, so good. I wait, I understand bank.
Speaker 2: Yeah. Now shadow banking boldly asked the question, Okay, but
Speaker 2: what if you did all of the banking backwards, no
Speaker 2: one had access to the books, and the government will
Speaker 2: only pay you back if the entire world economy looks
Speaker 2: like it's going to die.
Speaker 3: I feel like at that point the government should just
Speaker 3: just step back.
Speaker 4: And here's the thing.
Speaker 2: Here's the thing, right I I I yeah, Like I'm
Speaker 2: so down with this, like yeah, I don't know, fuck it,
Speaker 2: Like every single one of your motherfuckers is gonna pay
Speaker 2: this off by working as a barista for thirty years,
Speaker 2: like fuck you. But the government was like, nah, we
Speaker 2: want like we want capitalism to keep working.
Speaker 3: Make every hedge fund manager work at a waffle house.
Speaker 5: Yeah, fuck them.
Speaker 2: Okay, I'm gonna say something and then I'm gonna make
Speaker 2: a disclaim. So the kind of shadow banks that did
Speaker 2: two thousand and eight work in the opposite direction. They
Speaker 2: start with debt, they take that debt, and they turn
Speaker 2: that debt into like cash, right.
Speaker 3: Can I do that?
Speaker 2: No?
Speaker 3: Does that work for me at mid No?
Speaker 2: So okay, And I also want to mention there's a
Speaker 2: bunch of other kinds of shadow banks. The kind of
Speaker 2: shadow bank that's going under right now is not really this.
Speaker 2: The kind of shadow bank that's like exploding right now
Speaker 2: is a kind of shadow bank that's like what if
Speaker 2: a bank that wasn't a bank gave a completely unregulated
Speaker 2: loan with secret terms to a corporation, And that's the
Speaker 2: one that's going under right now. But for a long
Speaker 2: long time, the kind of shadow bank that was really
Speaker 2: important to the global economy, and this is still like
Speaker 2: a massive portion of how all of the economic system works,
Speaker 2: is these ones where you're trying to take debt and
Speaker 2: turn it into something you can trade for cash.
Speaker 4: So, okay, you take that, right. You start off with
Speaker 4: a mortgage.
Speaker 2: Okay, so this mortgagees pay out over the extremely long term, right,
Speaker 2: but you want to be able to trade this mortgage
Speaker 2: for cash, right, And this.
Speaker 4: Is a process called securitization.
Speaker 2: Turning this mortgage into something you can sell for cash,
Speaker 2: is making it into what's called a security. So now
Speaker 2: what happens right when his packaged is into a security
Speaker 2: when there's a securitization process, and then like the regular bank,
Speaker 2: the regular bank sends the mortgage to the shadow bank,
Speaker 2: and the shadow bank like does like stuff and turns
Speaker 2: it into a security. And now what this means is
Speaker 2: that instead if you who paid the mortgage owing money
Speaker 2: to the bank, you own it to the shadow bank
Speaker 2: or whoever the fuck the shadow bank sells it to.
Speaker 3: Right, Okay, so the real bank is involved. The real
Speaker 3: bank is involved.
Speaker 2: Yes, oh yes, the real bank is making so much
Speaker 2: money off of this is this is why two thousand
Speaker 2: and eight happened because Wells.
Speaker 3: Fargo did this with everybody's mortgage.
Speaker 4: Oh yeah, yeah, okay.
Speaker 3: Because I couldn't figure out because you said this is
Speaker 3: aw two doosy name, and I was like, I thought,
Speaker 3: Wells Fargo did that. That's a real bank. Oh, a
Speaker 3: real bank was shadow banking.
Speaker 2: The real bank figured out a way to sell their mortgages.
Speaker 4: And it's gonna get much worse as we go through this.
Speaker 2: But that's what causes this, right, is like turning is
Speaker 2: turning these mortgages into these like securities and like these
Speaker 2: like collateralized debt obligations and these like special packaged bullshit
Speaker 2: that you could sell to someone. So the way I
Speaker 2: would describe this is it's like, do you know how
Speaker 2: a bond works?
Speaker 3: Honestly, Mia, I do not.
Speaker 4: Okay, let's let's do this. We can we can do this. Okay.
Speaker 2: So the the kind of bond that you are normally
Speaker 2: likely to encounter is a government bond. Yeah, okay, So
Speaker 2: you you pay the government money to buy the bond,
Speaker 2: and what the bond says is at a certain point
Speaker 2: in time, you hand it back to the government and
Speaker 2: they pay you more money.
Speaker 3: Right, It's like a promise for later.
Speaker 4: Yeah. Right, So it's it's basically a.
Speaker 2: Loan, but it's a loan in a form where like
Speaker 2: the government's technically like selling it and and and then
Speaker 2: the other thing about bonds, right is if you hand
Speaker 2: the bond to someone else, well okay, I mean this
Speaker 2: is technically bear bonds, but like you can you can
Speaker 2: then give the bond to someone else and now and
Speaker 2: now if they give it back to the government, they
Speaker 2: get the money in like ten years. They get the
Speaker 2: money right, right, Okay, I get that, and you can
Speaker 2: sell these things. And this is what these people are
Speaker 2: doing with mortgages.
Speaker 3: That's not as like secured as like a government bond.
Speaker 3: Because if I had one hundred dollars government, like, if
Speaker 3: I have a one hundred dollars Bearers bond, I know
Speaker 3: for a fact on the date on the bond, it's
Speaker 3: gonna be worth one hundred dollars.
Speaker 4: Yeah, they're gonna pay out right.
Speaker 3: But if it's a mortgage market, the government's gonna pay it.
Speaker 3: But like the mortgage, the company has them work. That's
Speaker 3: not Yep, that's not real. That's not money. Nope, yep,
Speaker 3: that's like that's a that's a promise. But like my hand,
Speaker 3: it's behind my back.
Speaker 4: Yeah, it's it's a shit show.
Speaker 2: And this whole process is the largest sort of I'm
Speaker 2: not sure if it's actually the largest that I would
Speaker 2: need to actually yet I've never I haven't seen in
Speaker 2: death breakdown sectorially, but like.
Speaker 3: None of this is real. You could just say whatever.
Speaker 2: This this is one of the most important kind of
Speaker 2: shadow banks because in order to turn this mortgage into security,
Speaker 2: the moment you do that, you do this by creating
Speaker 2: what's called a special purpose vehicle, or someone else creates one.
Speaker 2: It's called a special purpose vehicle. Yeah, it's it's a nightmare.
Speaker 2: It's a nightmare.
Speaker 3: I'm gonna put this mortgage on a roller coaster.
Speaker 4: Yeah, it's fucking ridiculous. Right, it's a special purpose vehicle.
Speaker 4: Is it does a loopy loop.
Speaker 2: But the moment you create one of these that the
Speaker 2: moment you create one of these like security mortgages, right,
Speaker 2: that's a shadow bank.
Speaker 4: If you've created a shadow bank.
Speaker 3: Right, because that's not real banking. That's shadow bank.
Speaker 2: Yep, Because because you're creating another entity that is not
Speaker 2: a bank that's doing the banking stuff.
Speaker 3: I thought that the banking and the shadow banking were
Speaker 3: like separate things, right, because it's shadow it's like they're
Speaker 3: doing non think.
Speaker 2: They're all in.
Speaker 3: If the bank is the shadow banking, I would I'm stupid,
Speaker 3: but I would call that.
Speaker 2: A This is this is another thing that costs two
Speaker 2: thousand and eight because a bunch of what was is
Speaker 2: a crime. Because our country is run by the bourgeoisie. Molly,
Speaker 2: that that's why it's not a crime.
Speaker 3: You're just telling me this for the first time.
Speaker 2: Yeah, it's bad. So what what what happened? What happened
Speaker 2: in two thousand and eight. One of the things that happened, right,
Speaker 2: is so all of these regulators are supposed to be
Speaker 2: looking at the balance sheets of these companies.
Speaker 3: But they're hiding stuff off the book.
Speaker 2: Yeah, they were hiding these things in these like special
Speaker 2: purpose vehicles, like in these like shadow banks.
Speaker 3: They didn't open the trunks on the special purpose vehicles.
Speaker 2: Yeah, so no one could see the fucking dead bodies
Speaker 2: in the trunks of the vehicles because they weren't on
Speaker 2: the balance sheet that like the government had access to.
Speaker 3: What's the point of the balance sheet if you don't
Speaker 3: put the whole balance on it.
Speaker 2: I'm fucking I don't know. And this is like legitimately
Speaker 2: when when when you read the accounts of like why
Speaker 2: shadow Making Us exploded, by the way it's exploded in
Speaker 2: two thousand and eight, it's like way bigger and exploded.
Speaker 3: Like in popularity or like exploded as in like distrubularity.
Speaker 4: There's so much, there's so much more, there's so much
Speaker 4: more of it.
Speaker 3: Because also because it went so well, it went so
Speaker 3: well in two thousand and eight, and now.
Speaker 2: Because here's the thing, after two thousand and eight, we
Speaker 2: got like a little tiny bit of banking regulation, and
Speaker 2: the banks lost their fucking minds, and so more and
Speaker 2: more money went into all of these unhid shadow making things.
Speaker 3: Okay, but so like when a toddler has a tantrum,
Speaker 3: you don't give them a billion dollars.
Speaker 2: When the shadow banks went under, these things were not
Speaker 2: backed by the government.
Speaker 4: The government bailed them out anyways.
Speaker 3: Yeah, they didn't have to do that.
Speaker 2: Nope.
Speaker 3: So they really they learned their lesson. They really learned
Speaker 3: their lesson this time.
Speaker 2: Yeah, Like they bailed out these banks and they fucking
Speaker 2: sold you out, and like you know, like and one
Speaker 2: of the things that I think people have forgotten was
Speaker 2: there's this thing called robocalls. During the Obama administration, right,
Speaker 2: part of how the financial recovery happened was that all
Speaker 2: these banks would like go to courthouses, right, and they
Speaker 2: would just repossess mortgages on mass oh.
Speaker 4: And they had like a robot that was like signed it.
Speaker 2: It would just sign like a blank check sign off
Speaker 2: on all of these mortgages that were supposed to be underwater.
Speaker 2: And they would just steal people's houses, people who were
Speaker 2: on top of their payments. People who like to know money,
Speaker 2: they would just take their houses. And this happened on
Speaker 2: mass And this is like how the banks recovered. Was
Speaker 2: they stole everyone's houses. And that's a crime, right, it
Speaker 2: should have been a crime, like it was illegal. It
Speaker 2: didn't matter though.
Speaker 3: Because everything you're describing to me as a crime.
Speaker 2: It's so nightmarish. Well, it's here's the thing, most of
Speaker 2: this of them describing is not a crime. This was
Speaker 2: actually a crime. But why isn't nobody in jail because
Speaker 2: Barack Obama went up in front of these people and said,
Speaker 2: I am the only thing standing between you and the guillotines.
Speaker 2: I'm pretty sure that's a direct quote.
Speaker 3: And why didn't he bring the guillotine with him?
Speaker 4: Because he wants the capitalist system to continue.
Speaker 3: Question, I'm just upset.
Speaker 2: It's not good. Okay, So let let's go. Let's get
Speaker 2: you another question that you asked, which is why why
Speaker 2: would you do this? Why would you do this.
Speaker 3: To make money?
Speaker 4: Yes, but it's actually more complicated than that.
Speaker 2: Oh okay. So on the one hand, these assets, you know,
Speaker 2: a mortgage does make make more money than just putting
Speaker 2: your money in the bank. Right, that's like the basis
Speaker 2: of banking is that they can use your money that's
Speaker 2: sitting in the bank and getting interest, and then they
Speaker 2: make more money by spending it elsewhere.
Speaker 3: But so they're just doing this because they hate us,
Speaker 3: not just to make money.
Speaker 4: No, there is an actual explanation.
Speaker 3: There's a third reason.
Speaker 2: So then why would you ever have your money in
Speaker 2: a bank or like buy something like safe like government
Speaker 2: bonds you can sell really quickly, right, Why would you
Speaker 2: ever want that? And the reason why is something called liquidity?
Speaker 3: Right. You want to be able to spend the money, yes,
Speaker 3: rather than wait thirty years for it to get paid back.
Speaker 5: Yes.
Speaker 2: Liquidity is just how easy is it to turn whatever
Speaker 2: you own into cash?
Speaker 3: Right? For real money? Because most of it we're talking
Speaker 3: about is not money, it's the idea of money.
Speaker 2: Yes, So liquidity is literally it's the burger test, Right,
Speaker 2: can you buy a burger with this?
Speaker 3: Can I eat this?
Speaker 2: Money? Is like the most liquid asset, right, because you
Speaker 2: can you can? You can turn this into a burger.
Speaker 3: Right. So liquidity is the only part of this that's
Speaker 3: actually money. Everything else is not money.
Speaker 2: Yeah. Well, liquidity is the measure of how money is it?
Speaker 2: Basically like how easy is it to turn this into burger.
Speaker 3: Is this a special vehicle securitization that's not real, Mia.
Speaker 2: No, it's fake as shit. Right, this is not that complicated,
Speaker 2: right if you if it's like like you can you
Speaker 2: can buy a burger with ten dollars, Yeah, right, that's liquid.
Speaker 3: Actually you kind of can't these days.
Speaker 4: I know.
Speaker 2: I look, I look, I imagine a world where you
Speaker 2: can buy a burger for ten dollars.
Speaker 3: Imagine imagine a burger.
Speaker 4: Yes, imagine a burger that's purchasable.
Speaker 2: Now, what you can't buy a burger with is like
Speaker 2: the ten bucks that a guy you work with owes
Speaker 2: you for buying him a burger.
Speaker 3: Depends on how well you know the burger guy.
Speaker 2: Yeah, but that's that's where things get bad. Yeah, right now,
Speaker 2: the thing is right, right, So the ten bucks the
Speaker 2: guy you work with, like you not liquid. You don't
Speaker 2: have the money in your hands, and if you want
Speaker 2: to get it from him, you have to like go
Speaker 2: ask him for the money, and maybe he has ten
Speaker 2: bucks and maybe he doesn't, right, at which point you
Speaker 2: can't get your ten dollars back until he has the money.
Speaker 3: That but then ten dollars that I'm theoretically owed is
Speaker 3: an asset, though I have not a debt. Yes, okay, yes,
Speaker 3: that's stupid.
Speaker 2: Now loans loans are not liquid assets, right, And they're
Speaker 2: not liquid assets because you can't get the money back
Speaker 2: like immediately.
Speaker 3: So I don't have ten dollars I can spend, but
Speaker 3: on paper, I do have ten theoretical dollars.
Speaker 2: Yeah, right. And this is also like most of what
Speaker 2: billionaire money is, hey, correct, Like most of their money
Speaker 2: is like in like a stock or some shit or
Speaker 2: like it's weird fake money.
Speaker 3: Like theoretically they could access this amount of money, but
Speaker 3: they don't have it. Yeah, it's not real.
Speaker 2: Now okay, but there is this question, so why why
Speaker 2: would you keep your money in fake money instead of
Speaker 2: real money? And the answer is that it gives you
Speaker 2: more money back because say you're an asshole, right, and
Speaker 2: you're charging interest on your coworker for that burg.
Speaker 3: Right, So that ten dollars is actually worth more than
Speaker 3: ten dollars money. So the ten dollars that I don't
Speaker 3: have is theoretically worth well.
Speaker 4: You're worth more. Yeah, it's worth more than the money
Speaker 4: that you do have.
Speaker 3: I can get cheese on the burger, yes.
Speaker 2: Right, And this is this is like the fundamental thing
Speaker 2: of the banking system. Like one of them is that
Speaker 2: ill liquid assets or like assets that you that aren't
Speaker 2: money are worth more than money.
Speaker 3: I guess like when I put a small amount of
Speaker 3: my savings into a CD, that's what I'm doing, except
Speaker 3: normal style they're doing it weird. Yeah, basically because that's
Speaker 3: like an I liquid asset that I'm I'm I'm trading
Speaker 3: the ability to access that liquidity for the potential of
Speaker 3: more money later.
Speaker 2: Wait, so when you say do you mean like a
Speaker 2: like a physical like a disc, like a CD.
Speaker 3: No, a CD like at the bank, Like yeah, yeah,
Speaker 3: like the investment product.
Speaker 4: Yeah sure, yeah, yes, Sorry.
Speaker 3: I was like, no, I'm not talking about buying compact disc.
Speaker 4: I would just leave at five am.
Speaker 3: This time. It's investing me I ever heard of?
Speaker 4: Wow, there's actually a.
Speaker 2: Really an annoying thing researching this episode because there's like,
Speaker 2: so CDOs are like a type of loan that we'll
Speaker 2: kind of get you in a bit. But there's also
Speaker 2: a tech position called cdo. It's like chief something.
Speaker 3: Officer, stookie officer who cares.
Speaker 2: Yeah, whatever the fuck, right, But like when you're trying
Speaker 2: to search for stuff. That's like about CDOs, right, the
Speaker 2: other one keeps coming up. I hate it.
Speaker 4: Okay, okay, locking in, locking in, right, lock and load.
Speaker 2: Now, what if you both want into more money and
Speaker 2: also the ability to buy a burger?
Speaker 3: I guess I would uh probably break one of Carl's fingers.
Speaker 3: This is the guy that owes me the ten dollars, Carl.
Speaker 2: Yeah, but even then it's hard to even that's like,
Speaker 2: this is too hard for these people.
Speaker 3: I would go to Carl's house and kick him out
Speaker 3: of it.
Speaker 2: Well. Yeah, but the other thing is like, you are
Speaker 2: not very rich, okay these people. If you are really
Speaker 2: really rich, I am talking like billionaires, maybe like high
Speaker 2: high class multimillionaires.
Speaker 4: Well, you can go to a shadow bank.
Speaker 3: Oh right, you can get a loan based on the loan.
Speaker 2: No, well you're saying, so the thing is that you
Speaker 2: have money, right, but you want to turn your money
Speaker 2: into more money, like you have like an actual cash right,
Speaker 2: like you are you are, for example, a pension fund. No,
Speaker 2: you have a shit ton of cash. Or imagine imagine
Speaker 2: a pension fund.
Speaker 3: Right.
Speaker 2: This is okay. This is also really hard because it
Speaker 2: used to be easier to explain this because like we
Speaker 2: used to live in a world where people had pension
Speaker 2: funds and had mortgages, and now we no longer have
Speaker 2: pension funds or mortgages.
Speaker 3: I live in an apartment, and I will always live
Speaker 3: in an apartment.
Speaker 2: Yeah, no, and so still okay, So like imagine imagine
Speaker 2: a pension fund, right, you you have a shit ton
Speaker 2: of money from your members paying into the fund, but
Speaker 2: it's cash.
Speaker 4: You need to turn that cash into more money.
Speaker 2: But also you're a pension fund, so you constantly have
Speaker 2: to take money back out in order to pay the
Speaker 2: people who are retiring to pay old rifle.
Speaker 4: Yeah.
Speaker 2: And this is also a thing that like, you know,
Speaker 2: if you're just like a rich person, sometimes you want
Speaker 2: your a lot of times you want your money in
Speaker 2: assets that are like you can you can turn back
Speaker 2: into real money, but also make you wish a ton
Speaker 2: of money. Right.
Speaker 3: They need to sort of revolve a little bit theyd
Speaker 3: be like yeah, I don't know, like a jello like
Speaker 3: partially liquid.
Speaker 2: Yeah, and this is this is what the shadow banks do, right,
Speaker 2: because the thing that you can buy is one of
Speaker 2: those mortgages they've turned into like a security. Right, you
Speaker 2: can go buy someone else's debt huh. But because it's
Speaker 2: a magic security now. And these are called mortgage backed securities.
Speaker 2: And again, if you're to remember, yeah, anything about anything
Speaker 2: about two thousand and eight, that's what blew up the
Speaker 2: whole economy, is these mortgage back securities.
Speaker 3: Yeah, I've heard of that because it was bad, yep,
Speaker 3: terrible idea. And so we're still doing that.
Speaker 2: Oh yeah, it's good. Cool, I mean it's less specifically,
Speaker 2: the mortgage back ones are less bad. So they started
Speaker 2: doing it with like commercial retail loans, which is incredible, great,
Speaker 2: so that's really fun. They're also doing with other unhidd
Speaker 2: shit that we're gonna do like next episode. And what
Speaker 2: these people are really buying aren't just these like you're
Speaker 2: not buying like one person's mortgage, right right.
Speaker 3: They're like pooled and like bundled.
Speaker 4: Yeah, yeah, they.
Speaker 2: Like they bundle them all together, and then you you
Speaker 2: buy the rights to a percentage of the pool.
Speaker 3: It's not like when you sponsor like an elephant in
Speaker 3: Africa or something, and they send you a picture of
Speaker 3: like a specific element, or they don't send you They
Speaker 3: doesnt't to do a picture of the family you're arming. No,
Speaker 3: these are the Joneses you own their fucking house.
Speaker 4: Yeah, it's it's it's it's it's a it's a shit show.
Speaker 2: No, well, I mean eventually you might have to go
Speaker 2: figure out who that is because you like own whatever
Speaker 2: the fuck percentage of like the mortgages or whatever. But like, okay,
Speaker 2: so these are these are just like someone else's debt
Speaker 2: that you're buying, and that the people who can do
Speaker 2: this are you know, people who have billions of dollars.
Speaker 2: It's not you, the listener. And by the way, if
Speaker 2: you the listener have billions of dollars lying around for
Speaker 2: some reason.
Speaker 3: Can I have some please?
Speaker 4: Yes, please, please.
Speaker 2: Give me some of them so I can house like
Speaker 2: literally every trans woman and like transperson, I can. I
Speaker 2: can do it, Like, please give me your billions of
Speaker 2: dollars so I can I can achieve this goal. But
Speaker 2: like we're talking about you know, like like the Pension
Speaker 2: Fund of California, We're talking about mega corporations, insurance companies,
Speaker 2: the kinds of things I can actually buy these.
Speaker 4: Like you know. Now, this is where we get to
Speaker 4: one of the other problems, which is that.
Speaker 2: These things are not insured.
Speaker 4: So yeah, what do you.
Speaker 2: Do in order to try to make it less risky.
Speaker 2: What do you get if you can't pay the loan back?
Speaker 2: And this is what's called collateral.
Speaker 3: I don't know, swift punch of the nuts.
Speaker 2: Oh no, they take your house, right, Yes, that's supposed
Speaker 2: to be the thing, so okay. The way that like
Speaker 2: shadow banking loans tend to work is that they they
Speaker 2: have collateral, right, so you you give them something or
Speaker 2: or it's either you give them something directly or it's
Speaker 2: like if you promise to give them the thing.
Speaker 4: Yeah, and giving it to them directly is.
Speaker 2: Like a repo market thing. We're not really going to
Speaker 2: get into those right now, but this does. That's like,
Speaker 2: that's also a kind of shadow bank. But there's a problem, right,
Speaker 2: which is what if the thing that you're paying, you're
Speaker 2: paying as collateral, Like what if your house becomes worthless?
Speaker 2: And what if what if Molly.
Speaker 3: And it's completely uninsured and there's no way to fix
Speaker 3: it because I don't even have anything to give.
Speaker 2: You now now, Molly, what if And this is purely hypothetical,
Speaker 2: it could never happen in the real world, Molly, But
Speaker 2: what if somehow someone someone decided to use the same
Speaker 2: house as collateral for multiple different securities.
Speaker 3: Well, that could never go wrong.
Speaker 2: What if, Mollie, they made a word for this that
Speaker 2: is so complicated, I am not going to attempt to
Speaker 2: read it on the show. What if, Molly, what.
Speaker 3: Is it in German or something?
Speaker 4: No, it's like it's just like this, It's like the
Speaker 4: it's like the length of my head. It's like hyper
Speaker 4: hyper something bullshit. Like I refuse to say it because
Speaker 4: it is just.
Speaker 2: Like a completely like financed goal bullshit term they made up.
Speaker 3: So but the point of the point of collateral is
Speaker 3: that you can use it to pay off the loan
Speaker 3: if you default one. And so that literally won't work
Speaker 3: more than once because once I eat the burger, Once
Speaker 3: I eat the burger, it's bond.
Speaker 2: Yep. And this is one of the things that happened
Speaker 2: in two thousand years.
Speaker 3: I can't promise I can't promise ten guys my burger now, Molly.
Speaker 2: Here's the amazing thing here, right, because but the advantage
Speaker 2: for these companies, right is like, if you're the bank
Speaker 2: that has the mortgage, suddenly you can spin your mortgage
Speaker 2: off into like multiple securities that you can sell.
Speaker 3: Right, It's worth ten times more and that's great for you.
Speaker 2: Yes, and comma, comma. We we haven't even Okay, I
Speaker 2: just I just described to the sister where these people
Speaker 2: are promising the same house to most old people. This
Speaker 2: isn't even the extremely unfathomably reckless ingredy ships. No it is,
Speaker 2: Oh it is, but it's not the worst of it.
Speaker 3: Oh good?
Speaker 2: Okay, So do you remember that quote from when I
Speaker 2: was giving the first definition of shadow banking? Right, Like,
Speaker 2: I gave this quote from the guy who invented the
Speaker 2: term where he called it quote the whole alphabet soup
Speaker 2: of leveraged up investment, conduits, vehicles, and structures. Right, So
Speaker 2: we've kind of talked about the conduits, vehicles and structures, right,
Speaker 2: those are all of the shadow banks that like make
Speaker 2: the things, right.
Speaker 3: I love the conduits, vehicles, and structures. Yeah, all the acronyms.
Speaker 4: But what does leveraged up mean?
Speaker 2: Now?
Speaker 4: Okay?
Speaker 2: In this case, it means that a bunch of these
Speaker 2: banks have taken out a shit ton of like risky,
Speaker 2: high interest loans in order to buy more of these
Speaker 2: fucking mortgages because they think they can make more money
Speaker 2: off of it.
Speaker 3: So they took out they took out loans to buy
Speaker 3: these unsecured securities.
Speaker 4: The regular ass banks were doing this.
Speaker 2: Yeah, they they went into debt to buy more of
Speaker 2: these shitty mortgages.
Speaker 3: So they took out loans to buy what are essentially unsecured.
Speaker 4: Loves yep, because I thought it would make them more money.
Speaker 3: But there's no money involved. Money.
Speaker 2: It is about to get so much worse, right, so
Speaker 2: I okay, So sticking with leveraging for a second. Right,
Speaker 2: you might have actually heard of something called a leveraged buyout.
Speaker 3: I have heard those words, and then I stopped listening.
Speaker 4: Yeah, so shere's the thing.
Speaker 2: Leverage buyouts are something that actually happens in the real
Speaker 2: world that does fuck you directly, which is a whole
Speaker 2: bunch of companies that used to be like normalized companies
Speaker 2: like died because venture capital firms, you, by the way,
Speaker 2: are also shadow banks. Oh did this right? They came
Speaker 2: in tactically speaking, they did it through like risky bond purchases,
Speaker 2: but basically they did a bunch of high interest loans
Speaker 2: and then they go buy a company.
Speaker 3: And then they like strip it for parts, and.
Speaker 2: Then they try to raise the stock price of the company. Yeah,
Speaker 2: and then the river parts sell everything and get out right,
Speaker 2: that's what a leverage buyout is. These people are sort
Speaker 2: of are doing kind of a version of that, but
Speaker 2: like they're they're taking on this debt in order to
Speaker 2: like buy fucking shitty underwater mortgages.
Speaker 4: Because they look like they're making so much money.
Speaker 3: They're taking on real debt to buy hypothetical debt.
Speaker 4: Oh, it's about to get so much worse.
Speaker 3: That doesn't seem like a good idea, so not to.
Speaker 4: Get so much worse. So that's what like the leveraged
Speaker 4: part of that.
Speaker 3: I don't even know how you do that in burgers,
Speaker 3: I don't know.
Speaker 2: You're going into debt to like buy the promise of
Speaker 2: burgers in the future so you can sell those future burgers.
Speaker 3: Yeah, but burgers are real. The thing we're not talking
Speaker 3: about a real thing at all.
Speaker 2: Well, they're technically, technically speaking. Somewhere at the bottom of
Speaker 2: this is mortgages. However, Comma, we're about to get into
Speaker 2: a kind of asset where there isn't anything behind it.
Speaker 2: This is where.
Speaker 4: The really really truly unhing shit starts.
Speaker 2: It hasn't, which is that these companies figured out a
Speaker 2: way to bet on whether these mortgages were going to
Speaker 2: fail or not.
Speaker 3: That's so tight, Mia, I fucking love that. I love it.
Speaker 4: Yes, yeah, By the way, I kindatsize enough. How how unhinge?
Speaker 2: This is the mechanism they're using to do this is
Speaker 2: called a credit default swap.
Speaker 3: Oh, I've heard that phrase.
Speaker 2: This was supposed to be how they did insurance. Their
Speaker 2: mechanism for doing insurance on all of these insane loans
Speaker 2: they were doing was originally like, Okay, I'm gonna you're
Speaker 2: I don't know. So you have a you have a bank, right,
Speaker 2: the bank has given out a risky loan. So this
Speaker 2: bank goes to another bank they shouldn't do that, and
Speaker 2: they say, hey, if this person actually pays the loan back,
Speaker 2: I will pay you money.
Speaker 3: Okay, so the other so the other bank is like
Speaker 3: taking a gamble here.
Speaker 1: Yeah.
Speaker 2: So so the other bank that's giving out the loan
Speaker 2: right gets money if the loan goes under, So in
Speaker 2: theory they're sort of like insured against the risk.
Speaker 4: They call it like hedging.
Speaker 2: There like so likes like So theoretically it's less bad
Speaker 2: from them because now even if the loan goes under,
Speaker 2: they still get money back from that other bank. So
Speaker 2: the other bank is just bookie yeah, and the other
Speaker 2: bank is betting that they are going to get it,
Speaker 2: so then and if the loan does get paid, then
Speaker 2: that bank makes money.
Speaker 3: And this is legal for everyone to do. Yep, this
Speaker 3: is real banking or shadow bank. This is real bank.
Speaker 2: Didn't know this is technically actually.
Speaker 4: No, this is actually both both of them do this.
Speaker 2: Technically speaking, the instrument like like the actual like credit
Speaker 2: default swap or whatever, is made by the shadow banks,
Speaker 2: but then they're brought by the regular banks.
Speaker 3: I'm starting to think that the bank starts the shadow
Speaker 3: banks and then all of this is just fake and bad.
Speaker 4: Like so here's the thing.
Speaker 2: Here's the thing about these systems, right, is that, like
Speaker 2: a lot of the original literature on it was considering
Speaker 2: them separate. But it's like no, like the regular banks
Speaker 2: are making their own shadow banks do these things. They're
Speaker 2: all involved in these assets. They're also investing in the
Speaker 2: shadow banks, which is the problem we're having right now.
Speaker 3: It's like it's the same guy. He just like turns
Speaker 3: his chair around at his desk and he's like, now
Speaker 3: I'm shadow bank Todd.
Speaker 2: Yeah. Well, and sometimes it's that sometimes they're legitimately is
Speaker 2: other entities they work with, but yeah, but there's still.
Speaker 3: It's still a bank engaging. So it's like all these
Speaker 3: are non banking practices. Yeah, but the bank is doing
Speaker 3: it well.
Speaker 4: But here's the thing.
Speaker 2: The important part for that though, is that like the
Speaker 2: non bank also can do this with other non banks.
Speaker 3: Even better even Yeah, right, once we're once we're talking
Speaker 3: about chadow banking, Like the real bank should not be
Speaker 3: in the room, like go home, Wells Fargo, you don't
Speaker 3: belong here, you're drunk.
Speaker 4: No, but like they're funding all of this, right, If
Speaker 4: the real.
Speaker 3: Bank is involved with the shadow banking, that means like
Speaker 3: I can't opt out of being involved in this because
Speaker 3: they hit my money.
Speaker 2: Yeah, you know what we were talking about that at
Speaker 2: the top that like so some of these like bank
Speaker 2: banks had to like stop their withdrawals.
Speaker 4: Oh yeah, one of those, by the way, was JP Morgan.
Speaker 2: But that's a real bank. Yep. They're involved in the
Speaker 2: shadow banking shit, so they they are exposed to when
Speaker 2: they're like fucking seven hundred million dollar loon to like
Speaker 2: a fucking actually went home.
Speaker 4: Which one was the seven hundred million.
Speaker 2: Dollar I think a seven hundred million dollar loan that
Speaker 2: went under was the one that was to a subprime
Speaker 2: auto loan company.
Speaker 3: That's a bad investment.
Speaker 4: It evil.
Speaker 3: It's so, why am I trusting all of my money
Speaker 3: that I have in this world? I'm letting this guy
Speaker 3: hold on to it, who's obviously not good with fucking money.
Speaker 2: Well, because the FDIC is ensuring it.
Speaker 3: Why are you in charge of Why are you in
Speaker 3: charge of having the money? You obviously don't make great
Speaker 3: financial decisions because you invested seven hundred million dollars in
Speaker 3: subprime auto loans.
Speaker 2: So, Mollie, this, this is the This is the point
Speaker 2: where we need to bring debt the first five thousand
Speaker 2: years back into this and emphasize the extent to which
Speaker 2: the financial class has always been deeply connected to the military,
Speaker 2: and why has always been deconnected to war financing.
Speaker 3: I'm starting to realize that this is all very bad.
Speaker 2: It's very bad.
Speaker 4: It's all very bad.
Speaker 2: And this is this is to some extent why right
Speaker 2: like part part of what right wing conspiracism about the
Speaker 2: financial system is is that like these people are, like
Speaker 2: like the right wiggers, like these people are there's like
Speaker 2: a baseline level of anti semitism, like in the US
Speaker 2: right because it is a is a Christian society that
Speaker 2: is just like what fuck happens there? And these people
Speaker 2: are like, Okay, we can channel all of the anger
Speaker 2: at like, Oh, my gode By fucking house got stolen
Speaker 2: by the bank because because they were betting on the
Speaker 2: mortgage to fail.
Speaker 3: And I still understand why that's legal.
Speaker 2: Yeah, well, all of these right wing conspiracies do is
Speaker 2: they look at that shit and they go, oh, well
Speaker 2: it was the Jews and it's like but no, like
Speaker 2: fuck off, like these are all no, it was the
Speaker 2: band and the other thing. And this is actually a
Speaker 2: really important thing that's not well understood here is that
Speaker 2: like the actual people who run these fucking banks and
Speaker 2: the people who work at them are all fucking white
Speaker 2: Christian dipshits.
Speaker 4: This is like a really really like persistent issue.
Speaker 2: That everyone fucking has, which is that like one of
Speaker 2: one of the great successes of anti Semitism was like
Speaker 2: creating the image of the banker as a Jewish person.
Speaker 2: And no, they're not the bay Like I fucking went
Speaker 2: to school with these people. They're all a bunch of
Speaker 2: fucking white frat bros. They're fucking white Christian frat bros.
Speaker 2: Oh right, you University of Chicago.
Speaker 3: You have a degree in economics in the University of Chicago.
Speaker 2: No fact, I have an anthropology degree, Thank you very much.
Speaker 2: I took a not a fucking fake degree, like the
Speaker 2: stupid econ bullshit.
Speaker 3: I would say, that's actually so evil to study economics.
Speaker 3: It's so hidio Picago, you probably met some of the
Speaker 3: most evil people.
Speaker 2: On the most I was just like in a dorm
Speaker 2: with them. Okay, so but you saw that I know
Speaker 2: all these people. Yeah, and like it is not it
Speaker 2: is not a bunch of Jewish people. It's it's a
Speaker 2: bunch of Christian frat bros. Like that's like the thing
Speaker 2: that's actually going on. There's actually a whole One day
Speaker 2: I will write behind the Bastard's episode about leverage buyouts
Speaker 2: and about how like there was like a Jewish guy
Speaker 2: who kind of like like did a lot of the
Speaker 2: inventing stuff, but him breaking into the banking thing was
Speaker 2: like a whole thing because there was so much anti Semitism,
Speaker 2: because all of the banking sector was run by all
Speaker 2: of the fucking like weird dipshit like CIA, like like
Speaker 2: wasp motherfuckers.
Speaker 3: I mean, the Mormons have a huge hedge.
Speaker 2: Fund yep, yep, yep, yep, yep.
Speaker 3: Yeah, So, like the what is it? I read an
Speaker 3: article about the Hedge Fund that the Mormons operate like
Speaker 3: they have their like best and brightest finance bros. Like,
Speaker 3: you know, Mormons do their to your if you're really
Speaker 3: good at finance your mission, that you don't have to
Speaker 3: go to South America and like tell people about the
Speaker 3: Book of Mormon. You can work at the Hedge Fund
Speaker 3: as a mission.
Speaker 4: It's a nightmare.
Speaker 3: I'm doing a hedge funds for God.
Speaker 2: Yep.
Speaker 4: That's ASA's a shadow bank by the way, yep, it's great.
Speaker 2: So okay, okay, coming back to this again, right, so
Speaker 2: we're talking about like what causes two thousand and eight
Speaker 2: and how do these shadow banks like do this? And
Speaker 2: the answer is that they've turned all of these mortgages
Speaker 2: into these like fake securities they can trade, right, they
Speaker 2: package them all together and they find out something really crucial,
Speaker 2: which is that if they throw a bunch of loans
Speaker 2: that they obviously know are going to fail together and
Speaker 2: send them to a regulatory agency. And by the way,
Speaker 2: all of these like bonds that they're issuing have like
Speaker 2: grades based on supposed to be like how safe they.
Speaker 4: Are, and they figure out about that.
Speaker 2: Yeah, and they figure out that they can send a
Speaker 2: bunch of really shitty bonds. But if they package enough
Speaker 2: shitty bonds together, they could send them to the regulators,
Speaker 2: and the regulators would have would evaluate some of them
Speaker 2: as being good, and then you could sell the good
Speaker 2: ones to your pension fund because I thought it was
Speaker 2: a good bond and it made money. That's just lie.
Speaker 2: And then and then yes, and yes, and then and
Speaker 2: then behind the scenes, right, all of these fucking companies,
Speaker 2: all these shadow banks, all the regular banks, they're all
Speaker 2: doing these. They're all doing these credit default swaps, right,
Speaker 2: so they're all betting on which ones of these are
Speaker 2: going to fail.
Speaker 3: I'm putting all of these boys in time out. I'm
Speaker 3: gonna put them in the bottom.
Speaker 4: Of a pit so evil.
Speaker 2: And they start they start doing these, making these like
Speaker 2: even more complicated instruments right where. Now what they're what
Speaker 2: they're selling to you isn't just the package of mortgages.
Speaker 2: They're also selling you the credit default swaps with the loan.
Speaker 2: So theoretically, what's happening is like they've created an instrument that,
Speaker 2: regardless of what happens to the loan, you make money.
Speaker 3: That's not how anything works. No, it's bullshit.
Speaker 2: It's so obviously bullshit.
Speaker 3: I'm made of this fake thing where no matter what happens,
Speaker 3: I get rich. That's cool. I would love to do that.
Speaker 2: Yeah, And nobody was like, wait, well, I mean sometime
Speaker 2: a couple of people were, but like, like, people didn't
Speaker 2: just be like wait, hold on, no, obviously you can't
Speaker 2: make an asset that makes money regardless of whether the
Speaker 2: thing fails or not.
Speaker 3: I invented a money machine, Like that's fucking ridiculous.
Speaker 2: And then eventually yeah, it was like, no, they ran
Speaker 2: out of fucking mortgages.
Speaker 3: You know.
Speaker 2: One of the ways that the blame for this was
Speaker 2: deflected onto regular people was that they blamed the banks
Speaker 2: or like they blamed regular people for like not being
Speaker 2: able to pay the mortgages. But the thing is, by
Speaker 2: the time you get to the point where you're like
Speaker 2: packaging all that, you're betting on the mortgages. Right, if
Speaker 2: you're a bank, even if you're the regular bank, you
Speaker 2: don't make money off of like someone paying their mortgage back.
Speaker 4: You make money on betting on the mortgages.
Speaker 2: So you're incentivized to just keep giving out loans you
Speaker 2: know won't happen because you can sell those loans off
Speaker 2: to some other dipshit and then you and then you
Speaker 2: can bet on those loans that they're going to fail
Speaker 2: and you can make money.
Speaker 4: And that's how you make your money because you're.
Speaker 3: You're not a bank anymore. You're a bookie who's cheating.
Speaker 2: Yep.
Speaker 3: I don't think that's good Mia.
Speaker 2: No, this was the entire fucking financial system. We just
Speaker 2: let these people stay in power.
Speaker 3: And I'm just supposed to just continue living my life
Speaker 3: like this.
Speaker 2: I don't know why looking at this and then and
Speaker 2: then learning that all of these.
Speaker 4: People got fucking bailed up by the government and none
Speaker 4: of them went to prison.
Speaker 3: And do they know they're cheating liars who are faking
Speaker 3: and making it up? Or are they like so high
Speaker 3: on their own supply they're like They're like, no, bro, no,
Speaker 3: but this is totally gonna work. It's totally gonna work.
Speaker 2: Well, here's the thing. Some of them know and some
Speaker 2: of them don't.
Speaker 3: Because some of them believe that this is cool.
Speaker 2: Yeah, like some some of them legitimately thought that this
Speaker 2: was just going to work.
Speaker 3: Forefft, Like, do they believe their negative money, backed by
Speaker 3: other fake money, backed by the idea of promises of
Speaker 3: fake money. They think that's money.
Speaker 2: Yeah, yep, well thought was gonna work.
Speaker 5: It's not.
Speaker 3: It's not.
Speaker 2: Nope, And it turned out to not be any fucking money,
Speaker 2: and it blew up again, like entire countries, countries were
Speaker 2: buying these, they went bankrupt.
Speaker 3: So like this is less real than a board ape, nft.
Speaker 3: And that's really saying something. It's it's astonishing because at
Speaker 3: least the at least I can look at least I
Speaker 3: can look at the picture of the monkey. I can't
Speaker 3: look at.
Speaker 2: This no, like it like you can't look at the
Speaker 2: bet you're making on whether and whether monkey go down, Like.
Speaker 3: It's like like all my apes gone.
Speaker 4: Yeah, but it's suppressing because the entire world is just
Speaker 4: this Now.
Speaker 2: It's a shit the banks were doing where you're betting
Speaker 2: on whether mortgage would a feel, but now it's your
Speaker 2: betting on whether like what day we're going to drop
Speaker 2: a bomb on.
Speaker 3: A run, Like nothing is real and everything is gambling.
Speaker 2: Yeah yeah, And this is you know, what I would
Speaker 2: call a sort of terminal crisis stage of capitalism where alike.
Speaker 3: Because everything is so divorced from any material reality, from
Speaker 3: any good or service, Like.
Speaker 2: There is a limit to which you can run an
Speaker 2: entire economy that is purely based on gambling.
Speaker 4: Like, they're just there's a limit and we're going to
Speaker 4: hit it. Really so that's God.
Speaker 3: That's got to break, right.
Speaker 4: Yeah, yeah, it's going to break. It's good to break spectacularly.
Speaker 2: However, Comma, I do have.
Speaker 4: Good news for you.
Speaker 3: You don't, I do.
Speaker 2: I have good news you now actually understand what non
Speaker 2: bank financial intermediation is.
Speaker 3: No, I don't.
Speaker 4: I'm going to walk you through it. You actually do.
Speaker 2: So, I'm going to quote the IMS definition of non
Speaker 2: bank financial intermediation. Quote all entities outside the regulated banking
Speaker 2: system that perform the core banking functions credit intermediation, that
Speaker 2: is taking money from savers and letting it to borrowers.
Speaker 2: The four key aspects of intermediation are maturity, transformation. We
Speaker 2: know this one, right, This is this is what the
Speaker 2: bank does.
Speaker 3: The loan gets older. Yeah yeah, you gets paid back
Speaker 3: over time.
Speaker 2: Yeah, well it's you you turn your short term thing
Speaker 2: into a long term investment, or you.
Speaker 4: Do the opposite.
Speaker 3: Opposite, it's not good.
Speaker 2: They're both kind of a disaster, but like yeah, yeah, no,
Speaker 2: the opposite is kind of how we got.
Speaker 4: Into this mess. There's liquidity transformation, which we know this too.
Speaker 3: It's turned turning money into a thing that's not money.
Speaker 4: Yeah, or turning not money into a thing you can
Speaker 4: buy burger with.
Speaker 3: Okay, yeah, we got this.
Speaker 4: Leverage we also know.
Speaker 2: This, which is you go into a bunch of debt
Speaker 2: to buy something else. And then there's credit risk transfer,
Speaker 2: which we know that one too. It's the betting market.
Speaker 2: We're supposedly swapping the risk by both of you two
Speaker 2: are now betting on whether this thing is going to fail.
Speaker 3: So it sounds like even just like regular banking is
Speaker 3: kind of just gambling now.
Speaker 4: Yep, yep, yep.
Speaker 2: Well and it's fun too. So this is the thing
Speaker 2: that you used to be talked about more and isn't now.
Speaker 2: But like most of like like the world's corporations are
Speaker 2: also basically this now, like this has been a thing
Speaker 2: for a while. It's like the auto manufacturers don't make
Speaker 2: their money off of cars, I mean they sort of do.
Speaker 2: They make some money off cars, or like most of
Speaker 2: what they make their money off of is like the
Speaker 2: forward finance company, which is like the auto loans thing.
Speaker 2: Oh and then the auto loans thing trades a bunch
Speaker 2: of like does all of this other financial bullshit to
Speaker 2: make money?
Speaker 3: So, like, I don't think that's a good idea.
Speaker 4: That's that's what capitalism is.
Speaker 3: So everything, everything is fully reliant on this like.
Speaker 4: Stupid gambling bullshit.
Speaker 3: Emperor is wearing no clothes. Economy yep. And if anybody,
Speaker 3: if anybody points out that none of this is connected
Speaker 3: to a material reality, everything falls apart.
Speaker 4: Well, here's the thing.
Speaker 2: The thing that solves everything for falling apart is that
Speaker 2: the one thing you can do with your money is
Speaker 2: turn it into gun. Now I'm listening, and that's what
Speaker 2: stops of falling apart, right, because now I'm listening. And
Speaker 2: this is also a sort of graverism. But it's like
Speaker 2: behind every bank is a man with a gun because
Speaker 2: the reason that this money is even sort of real
Speaker 2: is that the bank can like you, like the police
Speaker 2: will come get you.
Speaker 4: Right, like men with guns will appear, and that coerce
Speaker 4: you to pay shit.
Speaker 2: Right.
Speaker 3: But what if what if instead of burger we bought gun?
Speaker 2: You know, Like this is what is broadly referred to
Speaker 2: as the revolution is it is broadly considered a negative
Speaker 2: by the financial sector. It is broadly considered a positive
Speaker 2: by everyone the fuck else.
Speaker 4: Okay, that's not true.
Speaker 2: It's not considered a positive by like, I guess, the
Speaker 2: people who own regular businesses. And this is like this
Speaker 2: shit that like, you know, it was kind of less
Speaker 2: unhinged back then, but like if you go read the.
Speaker 4: People who were like doing this shit in like the
Speaker 4: early nineteen hundreds, if you read the writing, it's all
Speaker 4: them being like, oh yeah, no, by the way, like
Speaker 4: a bunch of banks just like turned the entire Ottoman
Speaker 4: empire into like a debt peon, and now their entire
Speaker 4: economy is just dedicated to paying off these fucking loans.
Speaker 4: And this is like hideously fucking evil. Like they're all
Speaker 4: complaining about the same shit.
Speaker 3: And the important lesson we learned from that, The important
Speaker 3: lesson we learned from that was to do it more
Speaker 3: more oh yeah, yeah yeah, to invent increasingly more complicated
Speaker 3: ways of doing that.
Speaker 2: Yeah. And like this this is why the term third
Speaker 2: world is a slur, because because instead of being a
Speaker 2: political movement, because those the countries in the political movement
Speaker 2: that was called the Third World movement, all of their
Speaker 2: economies got fucking annihilated because they had these like loans
Speaker 2: whose interest rate could change, and the US jacked up
Speaker 2: all the interest rates and so suddenly their loans were
Speaker 2: like like the amount you had to like pay on
Speaker 2: the loans it went from like twenty percent or something
Speaker 2: to like fifty or one hundred or some shit. And
Speaker 2: you know, and like in these countries have never recovered,
Speaker 2: like Nigeria has never really economically recovered from the shit that.
Speaker 4: Happened to them.
Speaker 2: This This is why a whole bunch of Latin America
Speaker 2: is like this too, Like it was like why there's
Speaker 2: so much sort of like writing systemic poverty is that
Speaker 2: the economies were entirely transformed into machines to like pay
Speaker 2: back these fucking debts taken out by these dictators.
Speaker 4: This is the whole fucking economy now.
Speaker 2: And you know, there's other shadow banks that do other
Speaker 2: kind of completely unhand shit, right And I've been focusing
Speaker 2: this week on like specifically the kind that blew up
Speaker 2: the economy in two thousand and eight, But there's another
Speaker 2: kind that's like blowing up the economy right now, which
Speaker 2: is called private credit, which is I mentioned this briefly earlier,
Speaker 2: but private credit is and these like unregulated companies that
Speaker 2: are not banks give out unregulated loans with unknown terms
Speaker 2: to other companies, and then those loans go to shit,
Speaker 2: and there's a whole bunch of ways that can blow up,
Speaker 2: including by the way, these companies are funding a bunch
Speaker 2: of the AI bubble.
Speaker 3: Oh and that's a great investment. It's great, you know,
Speaker 3: because much much like a mortgage, there's a real physical
Speaker 3: thing like a house involved, Right, it's not just vibes.
Speaker 2: Oh yeah, oh molly molly.
Speaker 4: They those motherfuckers. I'm gonna talk about this a bit.
Speaker 2: I might have had just run on for this part
Speaker 2: of it too, just because like ED does this all
Speaker 2: the time. But like those motherfuckers out there selling securities
Speaker 2: that are backed by fucking graphics cards, like at least
Speaker 2: the more I can't believe I'm fucking saying this, but
Speaker 2: like at least the mortgage backed securities, like there was
Speaker 2: a house you could steal to get your money back
Speaker 2: graphics cards ball.
Speaker 3: All my apes aren't my oh my apes are gone.
Speaker 2: Like there's other ones that like it's it's so bad,
Speaker 2: it's just bad. But that's for another time, because it
Speaker 2: is late as fuck and we are out of here. Mollie.
Speaker 2: Thank you, Thank you for sitting and enduring an hour
Speaker 2: of you knowing what a shadow bank is.
Speaker 3: Now I almost know what a bank is. I'm still
Speaker 3: working on the rest of it, but I think I'm
Speaker 3: getting closer.
Speaker 4: I believe in you. I think we've made for a
Speaker 4: progress today.
Speaker 2: I don't know.
Speaker 4: Now you can kind of understand what's going on.
Speaker 2: When this sector explodes again in like two weeks.
Speaker 3: You'll have to explain it to me again.
Speaker 4: Then I will be happy to.
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