Next, David Resler, chief economist at Nomura Securities, wrote his version of "A Visit From St. Nicholas":

'T was the night before Christmas, the moon shining bright
The fam'ly room lit by only the hearth-fire's light
As flames from the embers like a jitter-bug danced.
I found myself, in a moment, taken entranced.
And in this dream-state my thoughts started to wander
To the past year's events on which I would ponder.
For the year had been full of both good news and bad
And markets at times seemed to have nearly gone mad.
After seeming to stall at the turn of last year,
An upturn in growth brought us all something to cheer.
At mid-year growth surged with no rise of inflation,
Putting down fears of that most dreaded stagflation.
And just like the porridge from that childhood fable
The economy earned the "Goldilocks" label.
But lest we forget, Goldilocks was a mere thief
Whose breaking and entering brought her to grief.
S o tho' the economy seemed healthy and strong,
Behind all the numbers there was much that was wrong.
It was clear the housing slump wasn't over just yet.
Its problems compounded in the market for debt.
At the root of the credit market's deep trouble
Was the bursting of the big housing price-bubble.
The bubble had formed back just a few years in time
Inflated by loans that bankers dubbed as "sub-prime.'
These were home loans the bankers too readily made
To borrowers with too low a FICO debt grade.
Some of these debtors pledged no income or assets
And were at great risk from interest rate resets.

Most of these loans were then put in asset-backed pools
That were structured with the best finance model tools.
Then C-D-Os were into multiple parts sliced.
Each tranche would by its own credit rating be priced.
Then came the SIVs, C-D-S and A-B-X too.
Each a new part of financing's alphabet stew.
With each layer adding greater complexity,
Some came to misjudge the basket's convexity.
Even super-seniors were more risky than thought;
Soon some investors learnt they knew not what they'd bought.
So when subprime foreclosures first started to rise,
Even high-rated tranches were in for surprise.
I n the wake of a flood of sub-prime loan losses,
Came layoffs that even hit highly paid bosses.
These debt market problems posed new risks for the Fed.
It needed to act fast lest catastrophe spread.
S o the Fed cut rates and added liquidity
Hoping to loosen the market's rigidity.
The Treasury too decided to take action
Seeking a way to give the house market traction
Mister Paulson says "If foreclosures we avert,
Neither lender nor borrower needs to be hurt."
If these measures work and the debt worries abate,
We should see much improvement by late in ought-eight.
And if most workers can in their jobs stay employed,
A dreaded recession we'll most likely avoid.
"So to health and good fortune," let's the wassail bowl lift
A toast that fulfilled would be a most precious gift.

And from Brian Rains, senior loan officer at Flagstar Bank in Atlanta, another version of the same classic poem:

'Twas 2004 and Housing was rocking
And all who wanted to jump in came a-knocking

The Wall Street Barons shouted with glee:
"Zero Down, Sub-Prime ARM's, and Interest-Only!"
"No savings, bad credit, you don't need to fear –
An Equity Line will save you, just wait a year!"

So Housing's skyrocket did continue,
And Wall Street kept saying, "This IS the venue!"

"More loan programs!" they screamed, and they did abound -
Option ARM's, Stated Income, and Negative AM!

"Owner Occ, 2nd Home, Investor – who cares?!
We just survived three years of Stock Market scares.
These returns can't be beat, don't you agree?
Every day is Christmas in lending – what glee!"

But then came '07, and my what a fright
Lending all of a sudden changed overnight.

Wall Street lamented, and cried with sorrow,
"These returns, what happened, and more ARM's adjust tomorrow!
"For Lo and Behold, these subprime ARM's – the 3/27's and 2/28's –
Are Adjusting, Oh Dear, doubled payments won't wait!
And these Equity Lines – of course now we see why -
After 17 rate hikes, we have now hit the sky!"

So lending is back to the basics once more:
"Establish savings, keep your job, and a good credit score.
Don't look to just Housing to be financially freed,
A diversified portfolio is what you will need!"

My 2007 Christmas Wish to you (please don't take light),
To keep your financial outlook stable and bright:

"May your payments be on time, and your spending be wise;
May you save lots of money, and not fear demise,
May your credit be stellar, and outlook be bright,
Your nest egg secured, and portfolio diversified."

Thank you to these writers for posting their work on the Internet and making us smile.

Happy Holidays.