Did David Bowie Cause the Credit Crunch?
As implausible as it seems, the Daily Mirror has today accused the pop legend of inspiring ‘securitisation', one of the key factors behind today's economic fallout.
Back in 1997 Bowie came up with the idea of selling his projected royalties income in the form of ‘Bowie Bonds'.
In other words, Bowie realised he would have a steady stream of money coming in from the sale of his music but rather than wait for it to accrue, he sold the rights to the future earnings so he could withdraw a large cash sum there and then. This became known as ‘securitisation'.
Towards the end of the 1990s, the banks began to adopt a similar model but on a much much larger scale.
But instead of selling royalties in the case of Bowie, they began to sell on mortgages that they had loaned to their customers.
The premise was that the buyer of the loans would have a guaranteed income from the interest on the repayments and the banks would take an upfront cash sum in return.
Banks were lending out huge bundles of loans in the guise of contracts, giving the buyer the rights to the future repayments on those loans.
The problems began when loans were given to people who were then unable to pay them back. This caused many of these contracts to be rendered worthless and a lot of this bad debt had to be written off, causing the financial system to lose billions of pounds.
Did Bowie cause the credit crunch? No. But inadvertently he set the paradigm.
The securitized mortggr market has been in exiatance since the 80s. It was in fact these mortgages that inspired the possibility of looking at other accountable income streams against which loans could be secured.
These income streams have included bridge and road tolls, ticket sales at new sporting arenas.
The lack of liquidity has been caused by too much risk being taken by banks on loans to individuals.
The advance given to Bowie was made for him to purchase outstanding recordings and invest in other projects. This was however of great benefit to the artist as here was a route for an artist to realise some value in their intellectual property without having to sell it outright. There are many examples of artist who have died penniless because they sold their rights to thier material at knock down prices.
Should Mirch wish to discuss with me in greater detail the whys and where fores of securitization in the entertainment industry i suggest he calls me so he can write an informed article not just the sort of conjecture that cuased misunderstanding and further harm to the financial markets.
Greed and keepin up with the Jones helped!
No wonder binge drinking is at a record high,britain sux!!!
ARREST MAJOR TOM!!
Quiet day in the office, journos?
Or at least an antedote?
Go go Bowie Ranger.