"This American Life": Giant Pool of Money wins Peabody

Ira Glass, host of "This American Life"

This fascinating, comprehensive look at how the housing crisis came about recently won a 2008 Peabody Award.

What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money.

Giant Pool of Money, which aired on PRI stations in May of 2008, recently won the 2008 George Foster Peabody Award. In honor of "This American Life's" achievement: This encore, on-line presentation for those who haven't listened to it, or who would like to listen again.

Prologue.
Host Ira Glass talks with an NPR business and economics correspondent about two gatherings he attended—one at the Ritz Carlton and one at a community college in Brooklyn. The first was an awards dinner for finance professionals who created the mortgage-based financial instruments that nearly brought down the global economic system. The other was a non-profit conference for people facing foreclosure. Ira explains that today's show lays out how the finance guys and the people facing foreclosure are connected by a chain of middlemen, and that together, they all brought about the current housing and credit crisis. (4 minutes)

Act One.
"This American Life" producer Alex Blumberg teams up with NPR's Adam Davidson for the entire hour to tell the story—the surprisingly entertaining story—of how the U.S. got itself into a housing crisis. They talk to people who were actually working in the housing, banking, finance and mortgage industries, about what they thought during the boom times, and why the bust happened. And they explain that a lot of it has to do with the giant global pool of money. (31 minutes)

Song: "Hard Times," The Sex-o-Rama Soundtrack

Act Two.
Alex and Adam's story continues. (23 minutes)

Alex Blumberg: "From 2003 to 2006, the housing market was in a classic speculative bubble. Home loans were easy to get, so more and more people were buying houses. The increased demand for houses caused the price to increase. The rising prices created even more demand, as people started to look at homes as investments -- investments that never went down in value. In 2003 and 2004, 2005, they didn't. You could buy a house with no money down, turn around and sell it a year later for in some areas double what you paid. People who'd never invested in real estate before started buying multiple properties as investments. There were shows on TV about how to do it.

"The problem was that even though housing prices were going through the roof, people weren't making any more money. From 2000 to 2007, the median household income stayed flat. And so the more prices rose, the more tenuous the whole thing became. No matter how lax lending standards got, no matter how many exotic mortgage products were created to shoehorn people into homes they couldn't possibly afford, no matter what the mortgage machine tried, the people just couldn't swing it. By late 2006, the average home cost nearly four times what the average family made. Historically it was between two and three times. And mortgage lenders noticed something that they'd almost never seen before. People would close on a house, sign all the mortgage papers, and then default on their very first payment. No loss of a job, no medical emergency, they were underwater before they even started. And although no one could really hear it, that was probably the moment when one of the biggest speculative bubbles in American history popped."

Song: "Time Machine," Grand Funk Railroad

Read entire transcript

Produced by Chicago Public Radio, "This American Life" is PRI's multiple award-winning, critically acclaimed program that describes and documents contemporary American life. More "This American Life."