Bailing Out the Bank of Beanie Babies International (Aka BBBI)

By Joe Wallace
(News-and-Society / Economics)

It has been many years since I have heard the pitter patter of little feet in my home. On Sunday, I was very pleased to be watching my 10 month old granddaughter while my son and my daughter-in-law were away on a vacation. In a search to find something in my bag of tricks that she would enjoy, I discovered a long forgotten box full of beanie babies that my two daughters had collected years ago. That discovery brought back a flood of fond memories, among them, my girls' expectations to become wealthy tycoons by collecting beanie babies.

It was the height of the dotcom boom when money was abundant and beanie babies caused normally rational adults wake up at 4 am to stand in line and purchase newly issued beanies. It has been reported that some people willingly spent up to $5,000 on rare and special beanie babies. I never saw that one, but I did routinely hear of parents in my own neighborhood that spent hundreds of dollars on a single beanie. My girls had a book that speculated on the value of these $0.25 cuddles of cloth and plastic. Many of the projections were well into the thousands. I had a standing offer to my girls that if they could sell one for half of what the books projection was that I would give them the other half. They never collected a cent from me on that offer.

It occurred to me that the box of beanies in my garage is very much like a portfolio of non-performing mortgages. Neither of them is worth near as much as they once were. Quite frankly, according to recent Ebay transactions, unlike non-performing mortgages, beanie babies have both stable value and liquidity. They routinely 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 beanies were considered to be investments by some, I began to wonder if anyone had actually borrowed money collateralized by beanie babies. I expect the answer to that question is no, but suspect that it may have happened. So, if enough people had bought beanies on credit, would our members of congress be debating the question of whether or not our government should be authorizing a $700B recovery plan for a beanie baby crisis? Imagine the amazement of watching someone testify before congress for legislation authorizing the buy back of $2 beanie babies with $5,000 loans against them at the deeply discounted price of $1,500. Of course this would be laughable 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 might make the decision to do exactly that.

What if banks could not lend money to good businesses because the value of their assets (beanie babies) had fallen so much that they were insolvent? What if your next paycheck depended on your employer getting a loan for working capital and the banks could not deliver due to the beanie crisis? If the economic system of our country ever depends upon our government buying beanie babies worth $2 for $1,500, would we as a people support that action? That is essentially the decision that our members of congress have to make. I hope that after careful consideration, they arrive at the best and most favorable choice 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 that Mr. Warner took rewarded him handsomely. It is of paramount importance that the entrepreneurs of the future choose to seek their 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.

Hadannah is a business consulting firm that helps business owners and management make important decisions on strategy, operations, product or service offerings, mergers and acquisitions, technology, and organization.

Hadannah subscribes to the basic principle that our consultants must measure their success in terms of our clients' financial results. Companies in transition that aspire to create wealth and transform their business models like to work with us. We are an action oriented firm that identifies opportunities for enhanced performance of our clients, and provides practical advice that works in a down to earth, friendly and approachable manner.

Ideal Clients Benefit from Hadannah Solutions

Companies that recognize that there is a constant need for innovation, optimization, and constructive change whether large, mid-sized, start-up or even non-profit make ideal clients for Hadannah. Hadannah examines each client business from a CEO perspective. We ask the right questions and dig deep into the numbers to mine practical solutions to the problems that keep business owners and managers up at night. We strive to make a profound positive impact on each client business. Please contact Hadannah to learn how we can improve your businesses bottom line and increase your value.