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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: 2912
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:
 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.
 Excellent Primer on Ingredients for Pending Economic Crisis October 26, 2008
Mark Zandi's is remarkable in creating a superb primer to assist anyone in understanding the dynamics of What Happened in the Economic World? I am utilizing Zandi's work as the focus in my college and high school economics classes.
A wonderful and compelling resource for the classroom and personal comprehension of the "factors" of the dilemma.
John M. Ostick
Economics Instructor
What happened and why... October 23, 2008
I recommend this book to anyone interested in learning about the history of the housing and mortgage bubble and the subsequent financial meltdown. The only flaw in this book is that it was published only months before the massive bank bailout and so it misses this extremely important chapter in the story.
One of the advantages of this particular approach to the topic is that you don't need a degree in economics or finance to understand it.
A Very Timely Book in This Economic Mess October 21, 2008
1 out of 1 found this review helpful
Reading this book will help you to understand how did we end up in such economic mess, not only the US but in global terms. It is written by an author that is truly qualified and knowlegeable on the subject. The pages are designed for an easier understanding and not written replete with so much banking and financial jargons. The author explained how it all started, steps by steps. Like a snowball rolling down a cliff, it grows and grows until it is so big enough like a monster that nobody can stop and just eats up everything on its path.
The first quote is a very powerful one and sums up what was behind the current crisis, "If it grows like weeds, it must be weeds". Why can't we learn from the past? This thing happens all the time. Being fed by greed, there is not one person or group that is the sole cause of the problem. Many of us are a part of it. The lust for more becomes a domino effect. There are many questions that need to be asnwered. Why did the Government did not act fast enough when it becomes clear that a disaster is coming? Where are these experts that supposed to be taking care of the country's well being?
I am a homeowner who bought my house just when it starts to crumble. I thought I got it low enough. Now the price is 15% lower. My mistake. I am also a small fry stock player which made me interested to pick this book. I found it helpful and very informative.
An amazingly easy to understand book on the subject! October 18, 2008
I read this book on a plane and it proved to be something that kept me awake.
This is really written well and it sheds light on some subjects that just had me confused about the mortgage implosion. It provides astonishingly understandable answers to questions like these below and about a thousand more you might not even know to ask.
How can a bank loan money it doesn't have?
How could a bank end up carrying the unpaid debt of a sub-prime loan that it doesn't hold the paper on?
How could the price of homes be going up and up and up in a market where people really don't have any "real" money?
Some things that I took for granted were explained really well also. Take for example the roles of Freddie Mac and Fannie Mae. What they were established for, and how they grew into publicly traded companies that the government is intent on keeping the doors open for.
Over all this book is a remarkable look at something that for most is a really complex creature.
The resulting crash becomes evident from reading this and seeing how home owners became less savvy while mortgage options became more complex.
This is a great book if you want to CLEARLY understand what happened and why the housing market crash is causing so much damage to world economies.
Well written for the subject matter... I didn't give it 5 stars because I think the author could have made this more powerful by telling a story rather than making it a clinical as he did.
This book is worth your time and your dime if you are interested in the why's of the fall. It become more valuable when we look at the next landslide that is to come...
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