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 enlarge | Author: Mark Zandi
Publisher: FT Press
Category: Book
List Price: $24.99
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Rating:  89 reviews
Sales Rank: 2863
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:
Excellent, very readable primer to mortage backed securities and the mess they created; not enough for those previously educated November 20, 2008
This is a well written, very clear description of the house of cards that goes by the name of mortgage backed securities. As pretty much everyone now knows, it is the collapse of this market that precipitated the current stock market collapse. In this book, the author leads you by the hand and describes how the entire mess was created, specifically how the credit-worthiness of the borrower became disconnected from the market valuation of securities derived from that borrowing.
To anyone who has watched recent financial events unfold and asked "how did this happen?" this book is VERY highly recommended.
That said, I am more reserved with my praise if you are the type of person already familiar with things like derivatives and "liar loans," and who regularly reads, e.g. The Wall Street Journal. I am in that category, and while I still found this book interesting, I found myself more often saying "yes, obviously" than "wow, I didn't know that until now."
One other shortcoming of this book is that it really doesn't offer much meat to gnaw on with respect to 'how do we get ourselves out of the current mess?' That's not surprising, really as this book was written before the current melt down (although the timing of the release could not have been better) and because the answer to that question is one to which a consensus answer has not appeared even among the world's brightest and more learned minds.
Nonetheless, I would VERY strongly recommend this book to financial neophytes and those who simply weren't paying that much attention to the mortgage mess as it was unfolding.
Timely and Prescient November 13, 2008
Could this book be any more timely? Are you wondering how we landed in our current economic predicament? Are you reeling from your last 401(k) statement? This book, written and released prior to the complete meltdown of the equity and credit markets that unfolded in September 2008 ( and continue to), will help explain what led us here, and while the author does indicate his inclination to believe the worst was over (we now know he was wrong), he is also quite prescient as he points to certain steps (by both private and public entities) that must be taken to alleviate the current pain and get us out of this mess, and to address underlying systemic factors to prevent its recurrence. His recommendations look remarkably similar to the actual action plans unfolding in Congress and the Treasury Dept in October/November 2008.
But here is the magic of this book, the author very clearly explains the direct and indirect connections between the inability of a homeowner in Anytown, USA to make his/her mortgage payments, and the subsequent meltdown of the mortgage market, and the resulting impact on the credit markets. Mark Zandi explains the intricate, overlapping role of all of the players here, the homebuyer, the banks, the mortgage brokers, the flippers and speculators, and the creative (i.e., greedy) investment bankers, but he spreads the blame around.
The best thing about this book is that the reader does not need to have a degree in economics to understand the basics of a very complicated industry and how its sophisticated (nontransparent) security manufacturing "creativity" led to a global recession. If you want to understand how big investment banks (Lehman, Bear Stearns) and several other financial institutions (Washington Mutual, Wachovia, etc.) could fail in such spectacular fashion, this book gives you the foundation. On the other hand, there is enough intelligent discussion and cogent explanation here to keep the more sophisticated reader engaged and walking away with a greater understanding of the beginning of the events in the sub-prime mortgage market that continue to unfold across the economy.
I would expect that the author is probably already at work on another chapter addressing market events in the fall of 2008, the government takeover of Freddie Mac and Fannie Mae, TARP and the bailout in general. Stay tuned for an updated edition.
Fair assessment of the problems of all things related to mortgages and more November 13, 2008
To be fair, I think the author did a fine job of describing in very easy to understand terms how mortgages exist and contributed to what is now widely accepted as a severe recession.
To anybody familiar with mortgages, mortgage back securities, credit-default swaps and other financial derivatives, this book will not teach anything new.
I do believe that a better approach to understanding the current financial crisis would be to read books regarding the Austrian school of economics. I would even go so far as to recommend Ron Paul's books, and any other books that look at the role the Federal Reserve serves in determining the overall money supply.
Better to Have Read Before the Crisis November 9, 2008
There's nothing wrong with this book except for the timing of its release. Even with that, the author and publisher actually should be commended for releasing such a timely book. However, with a topic that became so pervasive, so "front page," I think it would have been impossible to put out a book this detailed and thoughtful before the tidal wave of media coverage the sub-prime events obtained in October.
To make matters worse, there are a number of books that came out at the same time. I've been reading two, this one and The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It and attempted to read both fast enough to give a comparison/contrast of the two. Then, a third came out, Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis, and the crisis will be totally addressed if I wait to read the third :-)
There are, I'm sure, a few others out there as well at this point. So, it comes to this--if you're really set on understanding the details of how we became so cash-poor, either Financial Shock or The Suprime Solution are worthy readings. If you're looking for a financial-heavy account, choose the Mark Zandi book. If you're looking for a social view of what got us here, Shiller's book is better. However, both fill in where the other needs it, so reading both has value, especially if you missed the media blitz in October.
Both books fall short, though, where business books often do--the supposed "how to fix" or "what to do" going forward. Reading these books, even if you are Henry Paulson or someone else truly empowered to take major actions, isn't going to create any fix to this issue that the market isn't already correcting on its own. Reading these books won't make you a financial fix-it genius, but they will give you a good working feel of how we got where we are.
 Great Background But Isn't Complete November 8, 2008
Financial Shock is a good book for background on the subprime mortgage crisis. The author does a good job of explaining why "securitization" eventually led to the downfall of the mortgage industry. Unfortunately, the book does not have a decent ending, because many HUGE things have happened since it's publication. So, although you are given a narrative of the implosion of the subprime mortgage industry, you are not given a narrative for what follows. Of course, as of this date, it can't be given since the financial fallout from the subprime crisis will not be known for years I imagine. Thus, I'm not sure about the 360 subtitle. I was overall happy with the explanations in the book. Most of it is easy enough for a regular Joe like me to understand. There are a lot of abbreviations, but only a few are of importance to us, and most we have heard on the evening news recently. I do suggest reading the book, as it provides some bacis information that everyone should know. As much I blame the financial companies for the subprime mess, people also knew what they were getting into, and if they didn't, it is because they did not understand financial principles or have an attorney explain their contracts to them. If some of them had read this book first, such heartaches might have been avoided. No doubt the speculators would have went ahead trying to make a buck, and the crisis would still have transpired. But maybe everyone can learn a little about financial instruments and prevent something similar happening in the future.
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