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 enlarge | Author: Mark Zandi
Publisher: FT Press
Category: Book
List Price: $24.99
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Rating:  78 reviews
Sales Rank: 6420
Media: Hardcover
Edition: 1
Number Of Items: 1
Pages: 288
Shipping Weight (lbs): 1.7
Dimensions (in): 9.1 x 6.1 x 0.9
ISBN: 0137142900
Dewey Decimal Number: 332.7220973
EAN: 9780137142903
ASIN: 0137142900
Publication Date: July 19, 2008
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| Customer Reviews:
 Simple, Clear Explanation of The Financial Meltdown November 7, 2008
I am a twenty year Financial Consultant, Real Estate Agent, Insurance Agent. Although I am in the broader industry where these events have and still are occuring, there are many facets of the meltdown of which I was not familar. I found Mark Zandi to be very knowledgable, and to have an insight into the inner workings of the investment world that many of us working in it do not have.
Mr. Zandi has provided a good background, then explained each area that played a part in the Financial Crisis, and finally gave some excellent apraisals of the various players and their culpability. He summarizes with excellent suggestions for making the regulatory and policy changes that he feels will protect our markets and economy from future crisis.
This book is very well written and provides an understanding for readers at all levels. It would make a good educational tool for students.
Cliff Notes for 08 financial crisis November 5, 2008
Short sweet and to the point. An easy read that clearly and concisely describes how we got to where we are with the financial mess not only affecting the U.S. but the world.
Riveting, Even With its Flawed Conclusion November 2, 2008
Mark Zandi's "Financial Shock" delivers on its promise of providing a 360 degree look at the subprime mortgage crisis. Zandi was also right in calling the subprime mortgage crisis the nation's motion significant economic crisis since the Great Depression. Given the publication release date, he was also prescient in predicting that the Federal government would not let Fannie Mae and Freddie Mac go under. Zandi's depiction of the whirling vortex surrounding the subprime crisis reveals that at its zenith, the business of mortgage and mortgage investment was nothing more than a colossal Ponzi scheme. The maddeningly ironic thing about the business of speculating in mortgages was that this was an idea that was the basis for a startup business at Enron (See Brian Cruver's Anatomy of Greed: Telling the Unshredded Truth from Inside Enron).
As astute as Zandi's analysis is, in an astounding stroke of misguided optimism, Zandi also concludes that the "worst" was over. Given his analysis, the logical conclusion was that the ripple effect from the subprime mortgage crisis and the fall of Bear Stearns would have a ripple effect on financial markets and institutions (an aftershock if you will). Shortly after its release, Lehman Brothers, AIG and the State of New York all went into the tank. It begs the question, did he really believe that the worst was over or were other forces at work?
excellent overview October 29, 2008
Dr. Mark Zandi, the author of Financial Shock is a person of impeccable credentials and a brilliant mind. Financial Shock is a quite timely book that provides an overview of the Subprime Mortgage Implosion. In Financial Shock, Dr. Zandi examines issues surrounding this financial quagmire. He starts with factors leading up to the implosion, the belief that everyone should own a home, the role of the housing mercurial rise in providing investors alternatives to the traditional stock market, world-wide expanding investment, more competitive less honest lenders reduce or eliminate the proportion of loans made by more honest lenders, what are the new financial products that could be traded, effects on the construction industry, regulation and deregulation, the housing cycle, credit restriction globally, policy, and economic consequences.
I think that Zandi provides a crisp analysis of the problems surrounding the most dire financial crisis the world has seen in the last 79 years. He is a brilliant writer. I believe that this book is an excellent book to help the novice and perhaps undergraduates in understanding the economic, social, political factors that converged to create this financial devastation. He writes in a light, yet matter of fact style. It is a quick read and is very enlightening.
I wish that Dr. Zandi's book would have included greater detail on economic theories, policies and policy makers, who influenced whom in the development of de-regulation, forces involved in expanding the housing market instruments to less qualified persons, effects of the housing bubble on construction supply companies and state and local governments and real estate firms and schools and individual taxpayers, where have all the profits gone ... This is an outstanding book for the individual who wants to spend an afternoon or so in understanding the basics of the current financial crisis. So many of the basic facts were repeated throughout the book and it did not go into as much detail as I would have liked.
Overall, I believe that this is an excellent addition to the literature. It provides an excellent overview of the current financial crisis. I would give it an A-. I believe that for anyone interested in this issue and who does not have significant training or experience, this book is highly recommended. I think that this book would receive less enthusiastic welcome by MBAs and economists who already know and have surmised everything presented in this book.
Again, well worth the read, new or used.
 A fine 180 degree look October 26, 2008
The definitive explanation of the current financial crisis hasn't been written yet. Maybe it is too soon, but also: very few can cover micro-, macro-economics, structured finance (finance and econ are so different), global dynamics, and the regulatory/political backdrop. The subprime stew is a dizzy blend of fine technical detail and equally overwhelming big picture themes.
This books strengths are: given the topic, it is a relatively quick and easy (but not fun) read; the author is journalistically objective rather than political (except in one aspect, the decision to avoid the rating agencies altogether); and in regard to the front-end of the crises (residential real estate trends and retail loan origination), there is a great fact base which is truly revealing. Zandi traces events back to as early as 1995 (wow! the more this is studied the more we discover how long trouble has been brewing), and then paints a compelling picture of the housing run-up. And, finally, there is a compelling case here for the tragic mistakes in judgment made by Greenspan's Federal Reserve.
The books weaknesses are glaring: it's an incomplete perspective, it's a well-developed 180 degree perspective (The author's strength is analyzing retail-type data). First big weakness: Zandi recuses himself from an analysis of the role of the credit rating agencies. He says, "to avoid any appearance of a conflict of interest, I have no choice but to leave discussion of this facet of the subprime shock to others." (Zandi's firm sold to Moody's) This decision creates a huge gaping hole in the narrative. Informed case studies increasingly highlight the central role of credit rating agencies; one, by virtue of their location in the securitization chain, they have/had contact with most major player and are indisputably central. two, upwards of 70 to 80% of the notional subprime was eventually rated AAA via the magic of securitization, so these rating "stamps of approval" enabled subprime tranches to become positions in institutional-grade portfolios. For whatever reason, the omission of rating agencies limits this to a 270 degree perspective.
Second big weakness: the book is not particularly strong or detailed on the "back end" aspect of the crisis, the Wall Street perspective. The author has no first-hand accounts here. The back-end chain runs from originators to arrangers (and servicers) to warehouse lenders, the credit agencies, the investment banks that synthesized CDOs, CDOs-squared and (really popular) synthetic arb CDOs, and the investors. This is understandable: the author's strength is analyzing available date; there is not great data on Wall Street's role. You sort of need a first-person vantage of some sort. The practical Wall Street role is important because if not for the dispersion of lemon loans into the system via abstract layers (tranches) of asset backed securities, the impact might have been different. Zandi essentially tucks most of this under the rug saying "at bottom, securitization is not very complicated" (then later, "securitization didn't stop with plain-vanilla RMBS. It evolved into a dizzying, mind-numbing alphabets soup of financial products"). And, i didn't even see credit default swaps mentioned. The picture is incomplete (i.e., not 360 degrees) until you add the perspective of, say, Janet Tavakoli. It doesn't help to demonize the alphabet-soup complexity of securitization without specifics. This lack of important color in this regard further limits this to a 180 degree perspective.
Related, the policy recommendations are, in total, flimsy. Five naturally are related to mortgage origination. The other five are vague (raise transparency and accountability), banal (invest in financial literacy), and/or not precise enough to be actionable (overhaul regulation). For example, Policy recommendation #7 is to modify mark-to-market accounting. I happen to agree with him, but M2M isn't explained and there is no case made for this recommendation. As the opposition here is well-informed (e.g., CFA Institute and many, many others disagree) and highly populated, you've got to confront their strong arguments.
Also, the prose is bland; it reads like a survey. Easy to read? More like, puts you to sleep. Objectivity is netted by an utter lack of drama, conviction, or memorable human face put on this sprawling mess. Academic detachment is disorienting in this case. When you read somebody with first-hand accounts (e.g., Tavakoli), you invariably get angry or sad or something. There are *are* heroes and villains.
It is just as Lee Carlson says, a fine narrative. Much of it will be familiar to daily readers of WSJ. Dense on the front-end run up (housing, retail origination), but lacks unique, penetrating insights and fine detail on the varied cast of characters that enabled the money supply. Recommended as an introduction but this book will not survive the test-of-time as a definitive case study.
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