by Tanta on 3/16/2008 11:00:00 AM

Dr. Krugman has inspired me to get back to the Muddled Metaphor Index. Longtime readers will know that the MMI emerged last summer as one of our blog's tools for measuring distress in the credit markets. The MMI is calculated by plotting the disintegration of metaphoricity in reports of credit market events against the general unwillingness to recognize reality until it bites you on the shoulderblade, and then chortling over the results. Some people question the science here, but we tell them to go jump in a desert.

Today's text is the reliable New York Times on Thornburg Mortgage's problems. Personally, the thing I like best about this article is that it makes no sense whatsoever to anyone who doesn't already know what Thornburg's business plan is. You imagine the average reader asking: so if Thornburg doesn't make these "Ninja" loans, how come they own all these securities full of them? The term "leverage" haunts the article like an elusive ghost that hints at a sinister presence but never quite fully materializes. That's because the whole thing just begs for another awkward metaphor to be piled on.

There are in fact several gems here:

Thornburg already had one near-death experience last summer, when the mortgage crisis first hit and its shares plunged. Racing from interview to interview, and huddling with investors and analysts, Mr. Goldstone managed to convince the market that his company could survive. He even managed to raise more than $500 million in fresh capital from investors.

This time, though, the outlook is more dire.

Specifically, the problem concerns Alt-A securities, an obscure part of the mortgage debt market that may soon become as familiar as the now-infamous subprime category. Thornburg holds billions in securities backed by Alt-A mortgages, which were considered safer than subprime but not rock solid.

Alt-A (short for Alternative-A) borrowers typically had good credit scores but lacked the documentation to lift them into the prime category.

“Alt-A has been the precipitating event; it’s just been feeding on itself,” Mr. Goldstone says. “You have AAA-rated mortgage securities trading with junk bond yields. That makes no sense.”

Yeah, it was all so precipitous. Unless you're some blogger who has been harping on the looming Alt-A problem for a year or so. Then it's more like a--oh, no, not a--AAACK!---

The story of Alt-A and Thornburg also illustrates why the current credit crisis is different from past panics, like the market crash of 1987 or the crisis a decade ago when Long-Term Capital imploded. Those were rapid-paced events, which erupted and then faded from view. This is more akin to a slow-motion, chain-reaction car crash.

Whew. I was just sure it was gonna be a train wreck, and I don't think I can handle any more of those. But of course it's like a car crash in the ocean:

IN other words, this isn’t the tip of the iceberg; it’s another iceberg entirely.

So it's a precipitous event that is also slow-motion, a chain-reaction like hitting one iceberg and almost going to the bottom but not quite and then sailing on for a while until you hit a different iceberg because after having hit the first iceberg you are still convinced that those little bitty chunks of ice floating on the waves don't have great big honkin' bergs under the surface because, like, how often does that happen?

And as Mr. Goldstone can tell you, few can predict who will be the next to feel the impact.

Um. Few complete uninformed idiots could predict this. I'd guess that an entire troop of moderately alert cub scouts could go take a look at some financial statements to see who else is overleveraged in the Alt-A sector and make a couple of pretty solid predictions, myself.

Whocoodanode? is alive and well.