The financial crisis that began in August 2007 had relatively little to do with traditional bank lending…Its prime cause was the rise and fall of "securitized lending," which allowed banks to originate loans but then repackage and sell them out.
-- Niall Ferguson, The Ascent Of Money

The dust is still settling from the great market crash of 2008-09, and we still don’t know exactly who or what to blame. It might have been securitization, but it probably wasn’t David Bowie.

Securitization is the process of taking a group of assets and transforming them into a tradable security. By aggregating them into one large pool, investor risk is, in concept at least, distributed more evenly. Asset-backed securities resemble bonds in that they pay a fixed amount of interest over a specific time period.

These securities can be backed by mortgages, credit card debt, car loans, or anything else that will (theoretically) generate future cash flow.

Like song royalties, for instance.

In 1997, a fellow named David Pullman introduced the world to Bowie Bonds.

Bowie Bonds were securities backed by the future revenues from 25 David Bowie albums -- 287 songs in all -- that David Bowie recorded before 1990.

Pullman arranged to sell $55 million worth of 10-year bonds to Prudential, in what was the first high-profile case of securities backed by intellectual property.

What was in it for Bowie?

Oh, just $55 million upfront, as opposed to waiting for the gradual accumulation of his royalty income to reach that level -- plus, the rights reverted back to him after 10 years.

Prudential (PRU), which bought the entire issue, received the revenues generated by those 25 albums until the principal plus 8% interest was repaid. Pullman, of course, got his cut, as well -- about $6 million.

Some in the British press have accused Bowie Bonds of being the catalyst that brought the entire banking sector down.

Come again?

Yes, the London’s Daily Mirror claims the Thin White Duke (and David Pullman, by association) are responsible for the financial doldrums through which the world has been slogging for the past two years by creating the idea of securitization.

The Mirror makes the case that banks were rendered starry-eyed by this new technique and couldn’t jump on the bandwagon fast enough.

“Let’s make loans, but resell them and get all our money now! Then, we can make more loans with the money we just got back and repeat the whole process again and again until we’ve got more cash than any one person could ever possibly count! Plus, we’ll be laying the risk off to others, so we can’t possibly lose!”