A Failure of Metaphor

Sep 30

lindsayrgwattFinance Comments Off

Unless you live under a rock you’ve probably heard that Congress voted down Hank Paulson’s bailout plan and then the Dow lost 777 points.  The fundamental question is: why was it voted down?  There’s a lot of speculation that it’s due to the deal being unfair, it being too kind to Wall Street, etc., but I think there’s a more subtle issue.

I think the bailout failed in part due to a failure of metaphor.  No one in the Administration came up with a nice metaphor to succinctly explain to the average American why they needed to buy assets they don’t understand to keep a tightly coupled complex system afloat.

The one I keep thinking of is the gas station analogy.  The banks are the gas stations and credit is gas.  If you run out of gas or it gets really expensive you’ve still got your car and it works but you can’t get anywhere or you end up taking the bus.  Maybe this is too politically sensitive a metaphor in these days of $100 gasoline, but I think Main Street could be pursuaded to with a good metaphor (or simile).

In other news, here’s a great solution to the credit crisis.

The Giant Pool o’ Money

Jul 21

lindsayrgwattBusiness, Finance , Comments Off

I just finished listening to This American Life’s story on The Giant Pool of Money a.k.a. how the subprime mortgage fiasco became the credit crunch.  It’s a fascinating story, made all the more real by their “man on the street” interviews.  I highly recommend listening to it so you can get a taste of the ridiculous excess that led to where we are today.