Subprime Loan Crisis Explained By Cartoon Stick Figures

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Here’s a funny yet educational slide show (alternate link) explaining how the subprime mortgage mess was created through some complex financial trickery and well… simple and stupid assumptions. You know, like (1) housing prices always go up and (2) you can always refinance to another loan. There are a few expletives, but I would rate it PG-13.


Thanks to Kirsten who e-mailed it to me. I couldn’t find an author, but it seems to have been first posted online by The Big Picture.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

User Generated Content Disclosure: Comments and/or responses are not provided or commissioned by any advertiser. Comments and/or responses have not been reviewed, approved or otherwise endorsed by any advertiser. It is not any advertiser's responsibility to ensure all posts and/or questions are answered.


  1. Thanks for this. Made my day.

  2. awesome…

  3. Danny Tsang says

    Nor do we need monthly payments that cover the interest on your loan. The appreciation will surely outrun the additional principle we tack on every month. We also don’t need credit or trade lines. All we need is a pulse and an SSN.

  4. Great explanation. I didn’t know all the details about the segments and the ratings and such.

    And because there is more than one incarnation of the f-word, it defaults to the “R” rating.

  5. toasty aroma says

    Perfect illustration of just how retarded people are!

  6. That’s a pretty good illustration of what happened. I also saved these links (not sure if they were posted on this blog, or another) from a while back that provide some interesting comments:

  7. The ‘Ugly’ loans were divided up AGAIN, with a ‘good’, ‘badder’ and ‘ugliest’ rating….

    and they were sold as well… in those 3 tiers…

    *from businessweek

  8. I think too many people ignore how thousands of people took on loans that they didn’t understand and/or couldn’t afford. They are definitely responsible too. Everybody assumes that it’s the “big bad bank” but the other 50% of it was greedy idiots who wanted giant homes but couldn’t afford them.

  9. That was awesome.

  10. my friend showed me was hilarious…

  11. Very informative…

    I think you can only F-Bomb once in a PG-13…. that one would have to be rated R.

  12. Where’s the Uncle Sam stick figure bailing out the mortgage customer?

  13. I worker as an Account Executive and that was pretty much the MO. You’d just have brokers constantly refinancing borrowers to “take advantage of their equity” by cashing it out. And it was always, oh don’t worry, you’ll have more equity in 3 months and we can do it again…

  14. Everybody assumes that it’s the “big bad bank” but the other 50% of it was greedy idiots who wanted giant homes but couldn’t afford them.

    That reminds me of a line from the movie Airplane

    “They BOUGHT their tickets. They KNEW what they were getting into. I say: ‘LET ’em crash!'”


    • That’s actually not true.
      I can go to a Ferrari dealer and offer to buy a $300,000 car. They can reject me.
      Now if they decide to finance me, knowing full well that i’ll never be able to pay it back. It’s the creditors fault for taking the risk. Now if the creditor knowing that I don’t have the capacity to pay it back decides to sell that loan to a third party and sells it as good credit loan. That’s fraud.

  15. Rich: Kudos to the first commenter. He’s right, it’s a novel there, heck even just understanding his whole comment requires a bunch of history backing.

    Of course, he’s right too.

    The US economy is going to crash, very hard. And it’s going to take a good chunk of the world’s economy with it (I’m a Canadian prepping for the ride).

    There are two solutions:
    1. Alleviate the pain and institute a long-term inflationary recession. This is much easier to hide from people, though people will catch on. You can always hope that by then they’ll have accepted their fate.
    2. War and not just some piddly “we want to control oil and maintain the way of life” type of war. I’m talking, annex Canada for resources, move your aircraft carriers to the Pacific and just invade China war. Heck, you could take out India with like 5 or 6 good nukes… no more off-shoring problems… It’s ugly and it’s horrible and it would cost hundreds of millions of lives, but dead men don’t collect on debts and they also don’t need gold.

    But really, I never want to see #2 happen. I love reading post-apocalyptic books, but I still never want to see #2 happen. It would be terribly ugly.

  16. Independent George says

    Gates VP – #2 is called the broken windows fallacy. War is a massive drag on the economy; wartime production draws capital away from industry which would otherwise be spent for and by consumers.

    The ideal solution is option #3, which is how we got out of stagflation in the 70s – raise interest rates until inflation drops to manageable levels. Don’t panic when the recession deepens and people get laid off. Lower interest rates again after things have settled down.

    #3 is political suicide for anyone inoffice, which is exactly why the Fed is supposed to be independent of the President and Congress (and why Austrian business cycle economists think the Fed shouldn’t exist).

  17. Gates VP – I also enjoy post-apocolyptic books/movies… Any good recommendations? Recently read The Road.

  18. haha, I love the drawings. And here I thought I was the only one in love with picture story telling in personal finance. In any case, in response to the poster above me: I am much more afraid of inflation than recession. Quite frankly yes letting every reap what has been sown will be terribly painful but no where NEAR as damaging as massive inflation would be be (long term).

  19. Polished Turd says

    I applied for a loan about 3 years ago through one of the loan brokers advertising constantly on the radio. I questioned the stated income loans and how they came to my income and the broker’s response was, “Hey your pretty young and moving up in life. In 5 years you will be making a lot more than you are making now. You are going to have this house for 20 years, so we will state your income as what we think you will be making for the average of those 20 years.” With that he stated my income at about 50% more than I was actually making. I wanted a house and he told a good story. Ultimately, I came to my senses and did not buy a house on an ARM or use that company.

    My point is, you can’t just blame the people taking the loans or the financiers that packeged the junk. The brokers are the ones that lied on the applications and convinced people that they could make the payments and life would be good andthere was money for everyone just so they could keep thier commissions rolling in for a few years.

  20. I hope these Presidential candidates don’t decide to go around trying to bail out all of these subprime lenders and homeowners. The housing market needs to bleed itself out to get back to equilibrium. Bailing them out now would be penalizing those who were wise enough to stay away from hyper inflated housing prices.

  21. Great slide show. As I finance guy I keep remembering my profs words about the greater fool theory. As long as someone will buy your crap for more than you paid for it then you are golden. Then it continues up the ladder until the town in Norway is SOL.

    On the bright side I should be closing on a house soon that was financed at 100% LTV in ’05 and forclosed on by the bank in ’07. They paid 220k plus, I will pay around 170k. Couldn’t get that kind of deal a couple years ago.

  22. Jonathan – Off-topic, but would you consider doing a blog about auction-rate securities?

    Independent George: I agree, that would be the move — especially in the face of the current globalization. But based on the short history of Bernanke’s moves, that doesn’t look like an option w/ the Fed…to the detriment of our economy as a whole, IMHO.

  23. The real tragedy to this is not just the home issue, but that the economy and consumer spending were propped up on this. People would charge up a storm, pay it off with home equity that didn’t exist, just to see the home fall in value. Even a 100% LTV home would be good by some of the standards. Some people are at 130%+ and thats why they are walking away from the homes. They feel the value will never, or at least in a reasonable time, catch up to the loan value.

    Then the homes are dumped by the bank and that hurt the responsible ones!

  24. *grin*

    That got passed to me from a coworker and I immediately thought of you. I will have to track down who sent it to me originally and see if I can find a source.

  25. Hi-larious …. except for the missing slides:

    – taxpayers bailing out the mess (just the the S&L crisis in the ’80s);

    – the new homeless (those who knowingly took out mortgages they could not afford);

    – the new homeless (those who were convinced to take out a mortgage that was “too good to be true” … and was too good to be true);

    – the new homeless (those who did everything right but their own jobs are eliminated because the industry in which they worked is drastically affected by the subprime mortgage crisis);

    – the truly stupid who continue to sing the praises of free markets that “don’t need no regulating or non-industry oversight (and coincidently complain about high taxes … see first missing slide, above);

  26. One pet peeve of mine is when people say that those who are foreclosed on will be “homeless”. They won’t be homeless, they will just go back to renting, which is exactly what they should have been doing in the first place since they obviously could not afford to own.

    I think a simple solution to the problem would be to require all companies that sell mortgages to keep a certain % of the mortgage themselves (like 25% or so). They could then sell off the other 75% however they wanted. In the current system, the people who sell the mortgages have no interest in whether they can be paid back or not, but they have a large interest in selling mortgages so they can get commission.

  27. Nate: I’m reading Y: the last man right now (graphic novel, does cost some $$$, but very funny despite the morbid theme).

    Independent George: let’s be fair here, this is only a broken window on the international scale. On the american-centric scale it solves a whole bunch of economic problems: annexing Canada increases your available resources and starts reducing the international trade deficit. Taking out your primary lenders will make a whole bunch of people angry, but who’s really gonna say anything when you’ve got the biggest gun? It also helps that removing all of the dollars from circulation can actually help deflate the dollar.

    Look at the following scenario. I borrow money from 10 people and use that money to buy lots of food and 100 sticks of dynamite. Then I use 50 of those sticks and go blow up the 3 people from whom I borrowed the most money. I still have the food and the dynamite, but I owe less money than before, heck, if I can steal money from the people I blew up, I can start using that to pay back the other 7 and still keep my stuff.

    A lot of broken windows here, I definitely haven’t made the world a better place, but it’s better for me. I traded stuff for fear. Heck I still have 50 sticks of dynamite. I may not be able to take out the other 7 people, but who really wants to be the sacrificial lamb?

    Again… I am not advocating this… I don’t want Rumsfeld or Robert Gates reading this and thinking “Hey what a great idea, how can we spin that?” (not that they haven’t). I’m just saying that it solves the problem for the US.

    Personally, I’ll take the inflationary recession or the crazy high interest rates.

  28. Diane Allen says

    The innocent suffer with the guilty. I am not looking for sympathy. I just don’t want my tax dollars to go to a bail-out of the greedy and the stupid, both individuals and corporations.
    Here’s my situation:
    In 2005 I bought a house. The mortgage lenders tried to push me into an interest-only or subprime so that I could ‘buy more house’; I bought what I could afford for 10% down with a 30-year fixed mortgage at 6.35%. Now I can’t refinance for the lower 5.25% rates because MY HOUSE IS WORTH LESS THAN WHAT I PAID FOR IT!
    I’ve had to relocate to another state for work. My company isn’t covering my mortgage. No one’s buying. After 1 year I have a renter for 2/3’s of my mortgage payment. I can’t refinance.
    No one’s bailing me out!
    Don’t bail-out the greedy idiots who bought more than they can afford with my tax money!
    Don’t bail out Wall Street [Bear-Stearns] with my tax money!
    Don’t bail-out the banks and mortgage companies with my tax money!
    Don’t use my tax money to bail-out the stupid and the greedy!
    The federal government isn’t Santa Claus for individuals (like the Democrats believe) ot for the corporations (like the Republican’s believe).
    Why won’t any of our leaders stand up for hard-working, honest, middle-class American’s like me?

  29. Make Money says

    People shouldn’t have been mislead with what they can afford, it is a reallu unfortunate situation as said in the post above not everyone overstretched themselves the market has just altered and it is a difficult time to sell and make money

  30. K. Stewart says

    Nothing in the cartoon about government “social engineering” pressuring the banks to start these “crap loans” in the first place……

  31. I know of at least a half dozen relatives, friends, and acquaintances that became loan brokers during the past 6 years, and none of them had any background or education in real estate, banking, or any finance. They all took a short course given by a loan company and then sent out to collect exorbitant commissions on anybody they could sign-up. It reminded me very much like those pyramid scams where it was more important to have as many people under you selling a crappy product then developing a quality product to selling normally. These were predatory lenders who used to be scam artist, or telemarketers. They just found a new way to use the system to steal money.

  32. Where does lack of congressional bank oversight fit in??

  33. Bob Newhart says

    A good friend helped write this (in his own words, his primary contribution were expletives). Did it with a couple of investment bankers (note the “wow boss you are a genius” reference and the sucking up they had to do).

    I still refer this doc to people who don’t understand what happened. Pretty accurate tale of passing the buck

  34. John Moel says

    Friend of mine in the business sent me a link to this today after we talked about “the great debacle” the other night. It would be even funnier if it wasn’t so true.
    I didn’t start my brokerage till 2011, I was still in the Army at that time, but this explains a lot about what happened in some simple easy to understand terms.

    Everybody likes stick figures.

Speak Your Mind