Toxic assets brought our economy to its knees. You remember those, right? They were bundles of sub-prime mortgages, which were sold to banks like bonds. As the bundled mortgages were paid off each month, they promised a steady portion of the cash.
For the banks that bought these assets, the problems began when people couldn't pay the mortgages.
NPR's Planet Money--which brought you the Giant Pool of Money story that explained the entire mess--wanted to get a more concrete picture of the foreclosure crisis gripping the country. So the bought a single toxic asset, formerly worth $75,000, for a mere $1,000. And they've tracked its progress in a superb infographic, detailing that assets performance from December 2006 to the present day. (Graphic above, explanatory video below.)
The chart includes a map of where all the troubled mortgages in the asset are coming from, and a pie chart and bar chart showing the composition of the asset.
So how's it faring? Not so well. When first bought, the asset was a bunch of good mortgages, which could potentially have paid off the investment quite handily:
But now, a large share of those mortgages are in trouble. Only 2/3 are either paid off or current; the rest are in foreclosure or liquidation.
As you can see in the bar charts above, almost all of the houses represented in the asset have been sold off for a loss--meaning there's no more mortgage to pay off Planet Money.
Now, there's one thing to note: As the $1,000 price (and the $74,000 discount) indicates, Planet Money bought a particularly troubled bunch of mortgages. The results of their experiment are probably far more extreme than you'd see buying assets that sold for less of a discount. Their security includes some of the worst mortgages around. But these are very bad indeed.
If you don't listen to the Planet Money podcast, you should: Published twice a week, there's absolutely no better resource out there, for anyone looking for explanations about the state our world economy.