Benevolence Diffusion Algorithm

The WSJ explodes the story about the bailout you haven’t heard about yet: the unprecedented bailout of Christmas:

The picture of Christmas painted for Mr. Paulson by his rosy-cheeked host was bleak.

Apparently Santa’s difficulties in “producing product,” as Mr. Paulson described it, originated in a poorly understood aspect of the jolly elf’s current operations known as “Christmas list swaps,” or CLIPS.

Mr. Claus said that going back as far as anyone can remember, Christmas lists had been handled in the traditional manner. Children would draw up lists, which were left out in the evening with a glass of milk for collection by Santa’s elves; other lists would be exchanged with siblings, cousins and loved ones.

Several years ago, according to a participant who requested anonymity, some of Santa’s elves were contacted by representatives from Bear Stearns and Lehman Brothers, who persuaded the elves of the benefits of an elaborate scheme of Christmas-list securitization.

As outlined to the elves, the idea worked like this. Brokers would break each item on the Christmas lists into separate pieces and repackage the requests as securities, using a formula known as a “benevolence diffusion algorithm.” This would guarantee happiness for everybody in the world on Christmas morning. No one would lose.

Admit it. You just can’t resist reading a blog entry with “Algorithm” in the title, can you?

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