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.