Who securitized my cheese?

by Manshu on August 14, 2009

in Opinion

Post image for Who securitized my cheese?

A bank in Italy is taking cheese as collateral for its loans. Yes, that’s right: parmesan cheese. Parmesan cheese takes about 24 months to mature, and instead of letting it sit in their warehouses, cheese producers are depositing cheese with a local bank, and taking mid to short term loans against it.

I first read about this story in Bloomberg which reported that a regional bank – Credito Emiliano Spa has 17,000 tons of parmesan cheese stored in its vaults. Thieves broke into their vault in February and stole 570 pieces; luckily for the cheese producers and banks, they were nabbed by the police.

This looks like a novel way of collateralizing debt, but apparently, is happening from the Middle Ages.

The cheese producers come to the bank with wheels of cheese, which gets valued by the bank, and they get as much as 80% of the value of the cheese.

Now, here is one security that is not toxic.

This story prompted me to look for more unusual collaterals that are being used around the world, and I found two more that were quite unusual.

Your Soul

Reuters reported a story recently about a moneylender in Latvia: Kontora Loan Company, which gives out a loan, keeping your soul as collateral.

You have to sign a contract pawning off your immortal soul, and if you don’t pay, you lose your soul. This company loans out small amounts (up to $500), for 1 to 90 days, and if you don’t pay, then you don’t have a soul, that’s it. No debt collectors, no credit agencies, nothing. You just don’t have a soul.

This is a nice little gimmick, and I tried to look up details about the default rate of this company, but couldn’t find much data. If anyone has more info, please share.

Future Rights to Art Work

I found this story in the Guardian, about celebrity photographer: Annie Leibovitz, who collateralized a loan against every photograph that she has ever taken, and every photograph that she will ever take in the future!

The company that did the deal is called “Art Capital”, and specializes in lending money with fine art as collateral. I found it quite intriguing that the deal included every photograph she takes in the future till she pays off the loan because normally, you think of collateral as stuff you already own.

Looking at these examples make me think that there is just no limit to the stuff you can collateralize, it can be edible, spiritual or even something from the future, if you can think it, you can pawn it.

Image by Sbisson

{ 4 comments… read them below or add one }

Jessie August 14, 2009 at 7:02 am

wow, that is really quite fascinating! Thanks for sharing and putting that all together for us!

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Manshu August 14, 2009 at 7:28 am

It was fun putting this together!

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Jessie August 14, 2009 at 9:16 am

What do you think would be a better font colour for the black background that I have… I think pure white makes the words look fuzzy… thanks!!

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Miss M August 14, 2009 at 12:33 pm

I’d like to take cheese as collateral, except I’d eat it all! Pretty interesting.

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