Stock markets plummeted today in reaction to Steve Clifford's ultimatum that he would default on his debts unless the NFL defunded Super Bowl Halftime Pageants.
Citing polls that revealed over 90 percent of Americans think Superbowl Halftime Pageants are meretricious, jejune, and nugatory, Clifford stated, "The freedom loving American people who work, pay taxes and value the Constitution don't want Superbowl halftime pageants imposed on them by liberal elitists."
NFL Commissioner Roger Goodell disagreed. "It is true Americans find these pageants tawdry, tedious and vulgar. It is also true that these are exactly the qualities Americans seek in entertainment, especially as halftime relief from the degrading violence and mayhem of NFL football."
Under normal circumstances, a default on Clifford's unsecured personal debts of less than $50,000 would not trigger an economic panic. However, in October 2012 Goldman Sachs purchased a large portion of Clifford's IOU's at discounts from face value exceeding 70 percent. Goldman repackaged these debts and sold slices to 263 separate banks and financial institutions. Because Clifford claimed to be trustworthy, Standards and Poor's rated these obligations AAA. This rating enabled banks to borrow up to 1,000 to 1 against Clifford's payment streams. The banks used the proceeds of this borrowing to construct complicated put/call collars on Clifford's debts by buying and selling synthetic options to each other. Then they placed these assets in 236,894 different Clifford Debt Obligations (CDO's) that they sold to other financial institutions. The new buyers added to their positions by both going long and short on Clifford Credit Default Swaps. Overall banks have committed over three hundred billion dollars to securities related Clifford's debts.
Were Clifford were to default, the government might be forced chose between another Great Recession or bailing out banks that are both "too big to fail " and "to stupid to avoid it." Nonetheless President Obama was determined to resist what he termed "financial terrorism." "If we let Clifford blackmail us on Superbowl halftime pageants, what is to stop him from demanding the defunding of coffee drinks that cannot be described in five words, hydroplane racing, ring tones employing Wagnerian leitmotifs, Bordeaux vintages of the century, cats named Cato, Catullus or Catiline and careers in telemarketing?" an administration spokesman asked.
Obama has asked the Pentagon to provide him with a list of costly, but pointless and futile options for military retaliation should Clifford default. The military response will be carefully calibrated to enhance the administration's credibility while accomplish nothing of value. Presidential adviser David Axelrod asserted that Obama "will draw a line in sand the regarding Clifford's extortion." Axelrod later clarified that the line would be at the low tide mark.
Senator John McCain criticized Obama for wimpy temporizing. "Inaction is intolerable," he McCain stated.
One option the administration refuses to consider is paying off Clifford's debt. This would prevent a financial meltdown while costing less $50,000 compared to $400 billion for a bank bailout. But this is seen as politically impossible due to Republican opposition. "That would create a moral hazard," John Boehner explained. "People like Clifford must be held responsible for their actions. We can't use taxpayer money to reward irresponsible behavior. That would be worse than food stamps."
Clifford debt's resulted from betting that sane candidates would win elections.
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