Financial Shock: A 360 Degree Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis

I have been reading a number of books on the sub-prime crisis. Some of them are quite good. The Trillion-Dollar Meltdown, for example, is an excellent introduction to the high-level hocus-pocus that Wall Street was engaging in to bring on the crisis. Chain of Blame gives a good journalistic description of the history of the major players in the sub-prime industry. Greenpan's Bubbles gives an excellent summation of the prosecution's opening argument in People v. Alan Greenspan, making the case that it was all the fault of the Fed. This book, however, is absolutely, unequivocally the best book on the subject. It is everything that you want such a book to be. First, and foremost, Zandi knows the subject. He has in-depth knowledge of both economic theory and of the details of what actually happened in the market. His depth of knowledge is astonishing Second, he covers every aspect of the subject. Most of the books written on this subject cover only part of it. Zandi covers the waterfront. He understands the issues, in detail, from the policy decisions of the Federal Reserve Board to the cyclic nature of the housing industry. In a relatively short book, he covers literally every aspect of the subject. Finally, he makes balanced judgments without being judgmental or moralzing. His tone is very detached. He actually wants to understand what happened, not find the bad guys to pillory. On the Fed, for example, he gives a very clear explanation of what Greenspan was thinking, what he was trying to do, how it worked in some ways and was a disaster in other ways. He has the expected final chapter on how to fix things. It was short, but very good. I thought some of his ideas were kind of screwy -- why would it help to have national uniformity in foreclosure laws, for example? -- but, by and large, his ideas were practical and judicious. I think that every sane observer of the situation agrees that better regulation of the out of control mortgage and mortage-backed security industry is needed, and Zandi gives a good idea of how to do that, without overdoing it.

As a landlord, part-time/small-time real estate investor and someone that writes frequently for real estate/investment related concerns I almost passed by this book thinking it would add little to a timely albeit tired topic. Fortunately, this came up as an option in my Vine account so I decided to give it a chance...glad I did! First, the book is exceptionally "readable" without becoming insulting or overly simplistic. Newbies to the situation will appreciate the included background explanations while those more familiar with the situation will be stunned by the supporting documentation and research. There is plenty of meat to sink your teeth into {my apologies to the Vegan readers}. This is NOT a re-hash of the same old story broadcast on the media every night but rather a systematic explanation of the entire process from a variety of angles. Another factor I appreciated was the realistic "tone". The author avoids hysteria as well as an ovely analytic position and simply presents the case as it stands. It's refreshingly to the point and void of "fluff" - the author makes a strong point page after page and has a true book worth the time to read rather than an extended "report" that was filled with opinions or other filler to create enough pages for a book...this book takes longer to read simply because it contains real content worth reading! Finally, what sets this book apart from the rest is the structure and "weaving" together of many distinct points into one unified whole. For those who are familiar with the current crisis, much of the information will be something you are familiar with or have encountered in bits and pieces elsewhere - but pulled together it becomes a well documented story unto itself. For those seeking greater insight into the current financial fiasco and economic loss of confidence in the financial markets, take time to read this book and draw your own conclusions as to how far, how fast and how long this (and the next) financial crisis is likely to continue. With each passing day, this book becomes more timely and is well worth the time to read...and even read. Kudos to the author - a well executed book, well written, enjoyable and informative.

This is an excellent review of the current economic mortgage crisis that led to financial disaster. The author lays out all facts leading to this fiasco in an easy to understand language. No information is ignored in this fact finding mission; unscrupulous lenders, irresponsible borrowers, greedy speculators, developers, real estate agents, investment bankers/investors and last but not least the inept regulatory agencies destroyed the economic order and passed on the burden to unsuspecting tax payers. Subprime mortgage is a loan made on the basis of a weak or troubled credit history. Historically it was a peripheral financial phenomenon; a marginal market with few borrowers and lenders, but that changed in 1990s. Mortgage lending companies were not setup as traditional depositories or brokers, but as real estate investment trusts (REITs). It is a corporate form for developers to avoid corporate income taxes. REIT pays out the earnings to shareholders who pay personal income taxes on them. Since they are publicly traded, it avoids regulators. But it comes under SEC which focuses mainly on insider trading, and corporate transparency, and not on mortgage lending. This helped REITs financial mismanagement streak through regulatory cracks. By the time subprime financial shock hit, 35% of the after-tax income was spent on debt obligation (Fig 13.5). The financial benefits of outsized asset price gains have gone almost entirely to higher income households (Table 13.1). The ripple effect is observed all over economy: The government sold U.S. Treasury bonds to raise cash for the economic stimulus package but the consumers spent the entire check on raising gasoline costs. Saudi Arabia which bought most of these bonds essentially financed the purchase of their own oil! A sharp drop in dollar value in the international market did more damage than good, because this downfall helped the surge in oil prices, and consequently raised food and other commodity prices. Given the higher dollar value of Euro and Yen, Europeans and Asians were consuming more throwing the demand and supply curves off balance. This book is very well researched, and organized with useful economic data, and this is not for the investors who are looking for juicy financial secrets: Highly recommended. 1. Investing in REITs: Real Estate Investment Trusts: Third Edition 2. Real Estate Investment Trusts: Structure, Analysis and Strategy 3. REITs: Building Profits with Real Estate Investment Trusts 4. Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis 5. Subprime Meltdown: From U.S. Liquidity Crisis to Global Recession 6. The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It 7. The impact of the 2001 financial crisis and the economic policy responses on the Argentine mortgage market [An article from: Journal of Housing Economics] 8. Getting a Mortgage in the Subprime Crisis 9. The New Paradigm for Financial Markets: The Credit Cri

I've learned how securitization, unsavory lending, lies by borrowers and lenders, the effect home flippers had on the market, the accounting standard of "mark to market," and other various lending practices and financial instruments have caused the economic havoc we are now experiencing. Lenders are currently leary of lending money to financially sound borrowers due to fears of further financial crises. There are also more rigid lending criteria which further compounds the problem. The author does a fantastic job of explaining the complexity that evolved in the mortgage market over the last 10+ years. As a result, this book is a plethora of information on how the housing crisis has snowballed into what we are experiencing now. The author explains everything in detail in an engaging and easy-to-understand narrative that even the most financially illerate person can understand. I would have rated this book TEN STARS if that option were available. "Financial Shock" is an outstanding text!