Bonds

On Musical Chairs and Subprime Lending 

Subprime lending is often a bit like a high-stakes game of musical chairs: everyone knows the loan has a higher (high?) risk of non-payment and/or default, but so long as the cash is flowing, yields are meaty. So the loans are packaged, sold, repackaged and resold, over and over again. It’s not a new game — money flows freely while the music plays; the only question is who is left standing when the music finally stops.