Summer is the time for blockbuster sequels, but recycled schlock isn’t just for the cinema any more. Banks are rehashing tired old storylines of their own. The Return of the Monolines, I Know What You Did with Commercial Real Estate and other second and third instalments are either already playing or coming soon to an investment portfolio near you.
There’s still fodder for these yarns. The dastardly enemy, Subprime Mortgage, and his partner, Derivative Index, are wreaking havoc, slashing securities prices and undermining the capital foundations that sustain the league of banks. More recently, they have been joined by the Monolines, a murky cabal of turncoat former protectors led by bond insurers Ambac Financial Group Inc. and MBIA Inc. With their AAA badges rescinded, our heroes are at greater risk.
Alternative genres aren’t helping either. The docu-drama, Reversal of Liabilities, tells of big banks making small but useful amounts of profit, but finishes with a predictable ending showing what happens when prices rise again. Then there’s the comedy, Hedgie, the Wrong-way Bet, about an unlikely relationship between commercial property and his sidekick, short-seller. It looked a winner in early screen tests, but production has been delayed, causing more financial pain.
The coming attractions are heralding a slate of horror shows: Consumer Loans Massacre and Friday the 13th: Corporate Defaults. With the big financial backers expected to wind up with total losses around $1 trillion (Rs43.3 trillion), that probably means the refrain from investors next summer could well be the same weary complaint: Haven’t we seen this movie before?