Savonarola still wrong: another lesson from the mortgage mess

I lead with a fire-and-brimstone Renaissance preacher partly to make a point, and also to provoke Director Stergios, who I hope will comment in flawless Florentine dialect.

This morning’s Globe features a point-counterpoint worthy of Curtin and Belushi. Bruce Marks blames evil lenders for the mortgage crisis; Bruce A. Percelay has it in for evil borrowers. To sum up: America is entering a recession because of the stain on each of our souls. Today’s forecast: Plague, followed by a French army and some locusts.

Maybe because they have no boosterish agenda (other than Microsoft’s), MSN Money tends to offer some clear thinking about the macroeconomics behind the news. This Jon Markman piece is based on a discussion with Satyajit Das, “one of the world’s leading experts on credit derivatives.” He saves us poor suckers from damnation:

“Defaulting middle-class U.S. homeowners are blamed, but they are merely a pawn in the game,” he says. “Those loans were invented so that hedge funds would have high-yield debt to buy.”

Rest assured, apocalypse fans; rational explanations can be as scary as the other kind:

When you add it all up, according to Das’ research, a single dollar of “real” capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion — or eight times total global gross domestic product of $60 trillion.