Sunday, October 26, 2008

The Original NINJA Mortgage

Referring to the Dutch Tulip bubble of the late 17th century has become popular among journalists reporting on the credit crisis. But a later historical anecdote, the case of Theresa Humbert, of 1903, offers a better analogy of our current predicament.

Claiming to have inherited $20 million (in 1906 dollars) worth of bonds, title deeds, and securities, which she kept locked in a private chest, Theresa secured a loan for $10 million, which she then used to buy a fancy Parisian townhouse, a castle, and a yacht. When the bills came due, she was forced to open the chest and furnish the collateral, in a dramatic public trial, and inside, were several coins, a button, and some papers.

August 9, 1903, New York Times piece here.