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

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


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A look at the most important financial event since the Great Depression with lessons for homeowners, investors and policymakers

  • A fascinating exposé of the subprime crisis by one of the world's leading economists and experts on credit and credit markets.
  • How mortgage lenders, investment bankers, builders, regulators, and the Fed caused one of the most devastating global economic disasters in history.
  • How homeowners and investors can protect themselves from new financial shocks already on the horizon.
  • Description

    • Copyright 2009
    • Edition: 1st
    • Book
    • ISBN-10: 0-13-714290-0
    • ISBN-13: 978-0-13-714290-3

    “The obvious place to start is the financial crisis and the clearest guide to it that I’ve read is Financial Shock by Mark Zandi. ... it is an impressively lucid guide to the big issues.”

    The New York Times

    “In Financial Shock, Mr. Zandi provides a concise and lucid account of the economic, political and regulatory forces behind this binge.”

    The Wall Street Journal

    “Aggressive builders, greedy lenders, optimistic home buyers: Zandi succinctly dissects the mortgage mess from start to (one hopes) finish.”

    U.S. News and World Report

    “A more detailed look at the crisis comes from economist Mark Zandi, co-founder of Moody's Economy.com. His “Financial Shock” delves deeply into the history of the mortgage market, the bad loans, the globalization of trashy subprime paper and how homebuilders ran amok. Zandi's analysis is eye-opening. ... he paints an impressive, more nuanced picture.”

    Kiplinger's Personal Finance Magazine

    “If you wonder how it could be possible for a subprime mortgage loan to bring the global financial system and the U.S. economy to its knees, you should read this book. No one is better qualified to provide this insight and advice than Mark Zandi.”

    Larry Kudlow, Host, CNBC’s Kudlow & Company 

    “Every once in a while a book comes along that’s so important, it commands recognition. This is one of them. Zandi provides a  rilliant blow-by-blow account of how greed, stupidity, and recklessness brought the first major economic crises of the 21st  entury and the most serious since the Great Depression.”

    Bernard Baumohl,Managing Director, The Economic Outlook Group and best-selling author, The Secrets of Economic Indicators

    “Throughout the financial crisis Mark Zandi has played two important roles. He has insightfully analyzed its causes and thoughtfully recommended steps to alleviate it. This book continues those tasks and adds a third—providing a comprehensive and comprehensible explanation of the issues that is accessible to the general public and extremely useful to those who specialize in the area.”

    Barney Frank, Chairman, House Financial Services Committee

    The subprime crisis created a gigantic financial catastrophe. What happened? How did it happen? How can we prevent similar crises from happening again? Mark Zandi answers all these critical questions—systematically, carefully, and in plain English.

    Zandi begins with a fast-paced overview and then illuminates the deepest causes, from the psychology of homeownership to Alan Greenspan’s missteps. You’ll see the home “flippers” at work and the real estate agents who cheered them on. You’ll learn how Internet technology and access to global capital transformed the mortgage industry, helping irresponsible lenders drive out good ones.

    Zandi demystifies the complex financial engineering that enabled lenders to hide deepening risks, shows how global investors eagerly bought in, and explains how flummoxed regulators failed to prevent disaster, despite crucial warning signs.

    Most important, Zandi offers indispensable advice for investors who must recognize emerging bubbles, policymakers who must improve oversight, and citizens who must survive whatever comes next.

    • Liar’s loans, flippers, predatory lenders, delusional homebuilders
      How the housing market came unhinged, and the whirlwind came together
    • Alan Greenspan’s trillion-dollar bet
      Betting on the boom, ignoring the bubble
    • The subprime market goes global
      Worldwide investors get a piece of the action—and reap the results
    • Wall Street’s alchemists: conjuring up Frankenstein
      New financial instruments and their hidden contents
    • Back to the future: risk management for the 21st century
      Respecting the “animal spirits” that drive even the most sophisticated markets

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    A 360º Look at the Subprime Mortgage Implosion

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    Table of Contents

    Introduction 1


    Chapter 1: Subprime Précis 9

    Chapter 2: Sizing Up Subprime 29

    Chapter 3: Everyone Should Own a Home 45

    Chapter 4: Chairman Greenspan Counts on Housing 63

    Chapter 5: Global Money Men Want a Piece 79

    Chapter 6: Bad Lenders Drive Out the Good 95

    Chapter 7: Financial Engineers and Their Creations 111

    Chapter 8: Home Builders Run Aground 129

    Chapter 9: As the Regulatory Cycle Turns 143

    Chapter 10: Boom, Bubble, Bust, and Crash 159

    Chapter 11: Credit Crunch 173

    Chapter 12: Timid Policymakers Turn Bold 191

    Chapter 13: Economic Fallout 213

    Chapter 14: Back to the Future 229

    Endnotes 245

    Index 259

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