There's this guy named Walt. (Wall Street Banks) Walt has some money and he decides that he wants to loan some to some people for interest. He is a nice guy and wants to give these people a good rate because they have good hearts and trying to get on their feet and besides, in a few years he's going to jack up the rates. He tells them this too....somewhere, on one of those pages they signed. Besides, he's gonna just get someone else to look after that loan anyway. And also Walt's brother, Andy (AIG) is going to back up Walt just in case things go bad. Andy just wants to be sure that these loans are sure things, so he has asked Walt to have Mary (Moody) or Sam (S&P) vouch for how good the loans are. Walt has gone to Mary and told her that he would pay her $50 if she would just give some of these loans her highest rating. Since Mary is pretty sure that if she doesn't then Walt is going to get Sam to do it, so she does. "Triple A rating!" she stamps on it. Sam does this with a lot of other loans too, and sometimes it's Sam and sometimes its Mary but every time it's a "AAA!"
Andy is happily backing up Walt and his loans with his own money because he hopes that when all those loans get paid off, Walt is going to give him some of the profits too.
Meanwhile Walt is dreaming about all that money he's going to get when the interest in those loans piles up so thinking if all that money he is going to have in his pocket he goes to the casino. And starts betting all that money he's owed. And other people are betting that he's not going to get that money back. And people start betting on those bets. Then other people start betting on the bets on those bets. And they all say, "Jeeze, wouldn't it be cool if we had even more of those loans we could bet on?" Walt says he knows just where he can get some. He meets a few more nice people and some not so nice people, then just a bunch of people who have pulses and stops really caring about if they are nice or not. He get's more "AAA" from Mary and Sam and YEAH MORE FUTURE MONEY FOR WALT! Everybody is positive that the loans are an endless supply of fun and happiness, and sex in the Champaign Room!
Then, as per plan, the agreed to interest rates go up. Dramatically. Now the people who were given these loans, many of whom were convinced by Walt and his friends that they could afford the payments (including the stripper who bought 5 houses), can no longer make those payments. Turns out all those AAA were really BBB and were really called "junk". Walt calls Andy for the promised back up. Andy, it turns out, can't really help out. Walt starts to fail, but Walt and Andy's parents see that if Walt fails the whole community will go down the tubes, so they have to the bigger bank and take out their own loan to help bail out Walt. They let Andy die. As a lesson to Walt, and anybody who might want to be like Andy. They complain loudly about Walt's behavior and say things like, we should do things to make sure that Walt never gets too big to fail again. Mom says "we really need to set up some rules for Walt and...OH LOOK a shiny thing over there....what were we talking about?" Dad shrugs and Walt goes back to look for more people to loan money to.
Oh...and also, all those people who bet that Walt's loans would go bad? They made a killing.
