Subprime Borrowing

June 21, 2009

It all started because the UPA government was embarassed by Sainath blasting them for privatising Neyveli Lignite Corporation while farmers were dying in Vidarbha. They decided to show that they were doing something, so they passed a law making moneylending illegal and imposed stiff penalties on anybody who was collecting debts without a banking or chit fund license.

Unfortunately they didn’t count on Sweety Singh. Sweety Singh was rich, unemployed, always ready to stir up trouble, and enjoyed filing frivolous PILs. Once the bill had passed into law, he appeared before the Hyderabad High Court. In his affidavit to the court, Sweety claimed that he was appearing on behalf of a young man called Balaji Venkateswara who had a few millenia ago taken a loan from a moneylender called Kubera, and that Kubera was harassing Balaji for interest repayments to this day. Sweety claimed that Kubera had used most of the dirty tricks in the subprime lenders’ books – resetting interest rates, taking interest only payments and not letting the principal balance be paid down, and allowing negative equity – the loan had been taken for wedding expenses, and not the purchase of an asset.

To Sweety’s own great surprise, the High Court admitted the case and issued a show cause notice to the Tirumala Tirupati Devasthanam Trust, asking why it should not be charged with illegal moneylending and harassment of borrowers. Things got complicated because the TTD trustees were actually appointed by the Andhra Pradesh government. YS Reddy immediately announced that the trustees would be sacked and that the hundi collections at Tirupati would be diverted to the Chief Minister’s Relief Fund instead of going to pay interest to Kubera.

Naturally, there was a huge uproar. Hindus were aghast at this attack on tradition. Hindutvawadis alleged that YSR was doing this because he was a Christian and that the whole thing was a plot by Sonia Gandhi and the Catholic Church. In his Rediff column, Rajeev Srinivasan announced that the Indian cricket team’s latest series defeat was because of the attempt to seize the hundi collections. Because it was a rediff column, the commenters further suggested that it was a Chinese and Pakistani conspiracy – that is, the ones who weren’t bitching about how smelly Gults were. Murli Manohar Joshi was thrilled and mounted a simultaneous rath yatra and campaign for the BJP leadership. The whole nation was so preoccupied by the crisis that the news channels even stopped running stories about boys who fell down wells.

Finally the crisis was resolved by a young summer intern at Citi called Savitha Sundaram. By this time, the situation at Citi was so bad that senior managers actually had time to read their interns’ reports. When Savitha’s line manager read her report, he realised that it was a work of genius and worked madly to get her plan approved and implemented.

Two weeks later, Citi announced that it would be buying the original debt from Kubera. As a bank, it was entirely legal for it to lend money and collect debts from Balaji Venkateswara. Moreover, since Venkateswara was clearly a subprime borrower who hadn’t repaid the principal for centuries, the debt could be acquired for paise on the rupee. Vikram Pandit presented a cheque for 1 rupee to the Srilakshmi Kuberar temple in Ratnamangalam and so acquired the loan. Citi then created yet another CDO, this one with the hundi collections at Tirupati as the underlying, and sold it back to TTD.

The Tirupati temple kept getting the money from the hundi collections without actually being responsible for collecting on the debt, and the Andhra Pradesh government was no longer in the embarassing position of breaking the moneylending law. Citi also charged the temple a very minute fee on all the cash that poured through. It was less than 0.1%, but Tirupati got so much money that Citi flourished. Moreover, the value of the cash flows was enough to bring its balance sheet back to health, and it started repaying TARP money.

In this way Savitha Sundaram and Sanatan Dharam saved global capitalism.

Section 292

March 23, 2009

Kalpeshbhai had wanted to be a smuggler when he was growing up. In the movies of the 70s and 80s, the villain would always be a gold smuggler who would have an exotic lair, many henchmen, and a moll who would do cabaret dances on command. Kalpeshbhai was attracted to the lifestyle immediately.

Kalpeshbhai also knew that while the gold smugglers of the movies performed such basic mistakes as sending their henchmen to fight the hero one by one, he would go one step better and just get things over with by shooting him. That would take care of the main disadvantage of being a smuggler which was that somehow Amitabh Bachchan or Vinod Khanna always brought you to justice. Kalpeshbhai had no such intentions. He planned to be India’s biggest and most successful gold smuggler. In fact he dreamed of a time when Manmohan Desai would be inspired by his life and make a movie where Ajit played a gold smuggler who would eat dhokla and khandvi instead of biryani. It was a constant preoccuptation with him. At his accounts tuitions, while his cousin Sailesh would disappear around the corner with Savita Patel for fondling and giggling during the breaks, Kalpesh would sit at his desk, daydreaming about bringing in huge consignments of gold.

Unfortunately things did not work out for Kalpeshbhai. Not only did Manmohan Desai and Ajit die before he got the chance to become a smuggler, but the Government of India itself legalised the import of gold, making smuggling a pointless activity. He could always have become a drug smuggler instead, but he had also seen The Godfather and had decided never to do that. So he finished his B. Com. and started helping Saileshbhai in his electronics trading and honeymoon package tours businesses instead. However, his dream of becoming a criminal mastermind never left his heart.

Kalpeshbhai did not realise that it was in his destiny to become a smuggler after all. The first step came at Saileshbhai’s honeymoon resort in Alibag for couples who could not afford to go to foreign. Saileshbhai made every attempt to provide the appearance of foreign, including morphed pictures of the happy couple in front of the Eiffel Tower, and iPods along with receipts from Sim Lim Tower; but the lady honeymooners would still grumble that they were not able to do all the shopping they could have done in foreign. Saileshbhai was conscientious about customer service, and would always ask what he could do better, but for some reason the ladies were never forthcoming.

Kalpeshbhai then had the bright idea of asking their old friend Savitaben to help out. Savitaben conducted interviews with the honeymooners before they would leave Alibaug, and after a week explained to Saileshbhai what the problem was. Section 292 of the Indian Penal Code made it illegal to import, sell, exhibit, or purchase a wide variety of merchandise in India, so the good housewives of Kandivalil had to do their shopping in foreign.

It was then that Kalpeshbhai realised that he could become a smuggler after all. He immediately flew to Bangkok, and spent a fortnight in Thailand meeting contract manufacturers. By the time he returned, Kalpeshbhai had left heavy cash advances for the production of a wide variety of silicone and latex items, moulded into interesting shapes, and some even motorised. Not to mention leather items, metal items, and water soluble cellulose with added flavours. He also found a ship owner who was keen and eager to ignore such absurd paperwork as bills of lading and customs invoice, and would unload directly onto a launch off the coast of Alibag.

On his return, Kalpeshbhai firmed up the marketing end of things. Saileshbhai’s honeymoon resort was of course a firm customer, and Savitaben agreed to sell his merchandise on a retail basis through discreet word-of-mouth and referral advertising. Word of mouth spread very rapidly in fact. People all over Mumbai had realised that marriages were made not in Heaven but in Malad, and could always do with a little help. They rushed to Savitaben to purchase the marital aids which Kalpeshbhai had smuggled in.

Kalpeshbhai is a very satisfied man these days. The unfulfilled demand in Mumbai means that he can charge enough to cover the costs of purchase, Coast Guard and customs bribes, and shipping, and have enough left over to furnish his home as ornately as an 80s movie smuggler’s lair. And while he has not yet fulfilled his ambition of capturing Amitabh Bachhan’s ma, behen, and maashukaa and tying them up in his lair, he is happy in the knowledge that he faciltates the tying up of other people across Mumbai. And although Manmohan Desai is dead, he is reasonably sure that Madhur Bhandarkar will make a movie about his career sooner rather than later.