Think Twice Finance

The Bond Insurers: A Game of “Reverse Three Card Monty.”

Lunchtime on Wall Street has a flavor all its own. The streets are dominated by pirate CD stands and floating games of Three Card Monty. This is a very simple game. There are three cards on the table. The dealer turns one face up; let’s say it’s the Ace of Spades. He turns it down again and begins to move the cards quickly around the table. To win, you must follow the Ace as it moves around the table and turn it over when the dealer stops. You will fail if you try to win this game, since the dealer has simply palmed the Ace. It’s not there.

The bond insurers are at minimum, in danger of downgrades that end their value as guarantors. The world knows that.

Think of them as running a new lunchtime street game on Wall Street. The dealer shows you the Ace of Spades as before and turns it back over. There are 52 other cards turned over on the table. The object of the game this time is not to turn over the ace of spades. The rules are, everybody playing the game puts in a dollar. Players draw cards from the table in order of their decision to play the game, first come, first serve. If you draw a card, and it’s not the ace of spades, you receive your dollar back from the dealer, plus a fixed share of what’s left in the pot. When the Ace of Spades is turned up, the dealer walks off with the remaining pot.

While you are wondering what bothers you about the game, eight gentlemen, wearing expensive suits that, for some reason, need a visit to the dry cleaner, step up to the table. They generously offer to draw the last eight cards. You do the math and think, “Why would they do that?” (It would be good to think long and hard about why they would do that.) Then a man from the government comes over to the table. He says he knows everything about the game and it has his approval.

Should you hurry to put your dollar into the game? If your answer is yes, eat your lunch in Times Square, Central Park, the West Side. Anywhere but Wall Street.