Toxic Assets or Toxic Jargon?
Posted: Friday, February 06, 2009
by Joseph Jagde
In the media, there is almost a constant referred to soured investments held by major financial concerns as toxic assets.
It is as if they were tainted with some chemical poisons. Yet there are financial instruments that were packaged in various ways and it is said that there were over 26 billion dollars in fees collected just for the packaging process of mortgage backed securities that in many cases are now deemed toxic. So it wasn't that these firms were implanted with these assets, they chose to go with them and conduct business in that fashion and made huge bets in the direction of these assets.
But by using the word toxic, there is a rush to dump these assets on others, namely the government and by proxy taxpayers. It was somebody else's party and now some things went wrong and the label toxic is a not so subtle means of labeling these things as being something to pass along to someone else, hence the bailout. But as these financial products were created and securitized, they weren't sold and marketed with the label toxic.
When else has such a label been used? A used car may have decreased in value, but has it ever been that the word toxic is used by someone trying to sell a used car?
It seems like someone went to the race track, made massive bets and called their losing tickets toxic and asked for someone else to take on the charges, yet they would have taken all the winnings for themselves had things gone in the other direction.
The jargon toxic, in this case is just part of the manipulation to pass the buck and get someone else to pay for the party.
Imagine if this expression travels, pretty soon baseball will be trading toxic players who no longer hit over 300. People will call there utility bills toxic and hand them to someone else. There will be toxic dates with anybody that isn't nearly perfecto and dating partners can be marked for the garbage heap but somebody else has got to pay for this toxic date.
Any bad investment, anybody that has something that goes sour, will call it toxic and get the relief from elsewhere, from people that weren't going to be in the good loop if things remained in the way of good, and wouldn't have been part of the party when things were going good.
But now they get to come in and take the toxins away and pay for them while there at it..
It is interesting that Henry Paulson and his crowd bandied about this expression.
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