Saving the Bank from Beanie Babies International (Aka BBBI)
It has been many years since I heard the tapping of little feet in my house. On Sunday, I was very happy to see my 10-month-old granddaughter while my son and daughter-in-law were on vacation. On a quest to find something in my bag of tricks that she would enjoy, I discovered a long-forgotten box full of beanies that my two daughters had collected years ago. That discovery brought back a flood of fond memories, including my daughters’ expectations of becoming wealthy tycoons by collecting hats.
It was the heyday of the dot-com boom when money was plentiful and beanies made normally rational adults wake up at 4 a.m. to line up and buy newly issued hats. It has been reported that some people voluntarily spent up to $ 5,000 on rare and special baby hats. I never saw that one, but I routinely heard from parents in my own neighborhood spending hundreds of dollars on just one hat. My daughters had a book that speculated on the value of these $ 0.25 cloth and plastic hugs. Many of the projections ran into the thousands. I had a permanent offer for my girls that if they could sell one for half of the book screening, I would give them the other half. They never charged me a hundred for that offer.
It occurred to me that the box of hats in my garage looks a lot like a portfolio of delinquent mortgages. Neither is worth as much as before. Frankly, according to recent eBay transactions, unlike delinquent mortgages, beanies have both stable value and liquidity. They typically sell for between $ 2 and $ 10 each, plus shipping and handling. The volume is there to support many transactions. Beanie babies enjoy a mature and stable market.
Since hats were viewed by some as investments, I began to wonder if anyone had borrowed money collateralized for the hats. I hope the answer to that question is no, but I suspect it may have happened. So if enough people had bought hats on credit, would our members of Congress be debating the question of whether or not our government should authorize a $ 700 billion recovery plan for a baby hat crisis? Imagine the amazement to see someone testify in Congress for legislation authorizing the buyback of a $ 2 baby hat with $ 5,000 loans against them at the deeply discounted price of $ 1,500. Of course, this would be ridiculous and manna from heaven for late-night comics and talk show hosts. In the right set of circumstances, rational people, presidents, and members of congress could make the decision to do just that.
What if banks could not lend money to good companies because the value of their assets (hats) had fallen so much that they were insolvent? What if your next paycheck depended on your employer obtaining a loan for working capital and the banks were unable to comply due to the cap crisis? If the economic system of our country ever depends on our government buying a wool hat worth $ 2 for $ 1,500, would we as a people support that action? That is essentially the decision our members of Congress must make. I hope that after careful consideration, you will come up with the best and most favorable option on which to build a new economy. For 232 years, the United States of America has enjoyed unique freedoms that have enabled us, as a country, to offer opportunities for prosperity to the world’s best and brightest.
Ty Warner, the founder of the beanie baby empire is a billionaire and an example of the success that can be achieved in a free market system. The risks Mr. Warner took paid off handsomely. It is of the utmost importance that the entrepreneurs of the future choose to seek fortunes and reap their rewards or failures in this country that we cherish as the land of the free and the home of the brave.