Back in January 2010, seeking o learn more about the mortgage-backed securities that helped destroy the global economy, the staff of National Public Radio’s Planet Money podcast pooled their money and bought part of a mortgage-backed bond. “Toxie” lasted only a few more months, earning $449 for her owners before so few mortgage payments were coming in that she “died.” Or at least stopped earning money.
The bond’s original face value: $75,000. By 2010, this asset was so toxic that even reporters could afford it, at about $1,000. Toxie lost about half of her value before her death, but a current lawsuit might change that. As the now-owner of Countrywide, Bank of America is being sued for making risky loans and selling then as even riskier investment vehicles. Toxie is part of a bond whose owner is suing.
It’s unlikely that these lawsuits will succeed. But if they do, investors would get back that original face value. An unexpected windfall for the reporters who only paid $1,000, but salvation for the investors, such as a New Jersey carpenters’ union, who paid the sticker price back during the housing boom.