Financial Shock (Updated Edition), (Paperback) Global Panic and Government Bailouts--How We Got Here and What Must Be Done to Fix It

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  • Edition: 1st
  • Format: Paperback
  • Copyright: 2009-04-15
  • Publisher: FT Press

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This new edition has been systematically updated to include insights into the dynamics of the worldwide 2008 financial collapse, the freezing of credit markets, the extraordinary actions governments have taken in response, and the massive economic fallout.

Author Biography

Dr. Mark Zandi is chief economist and cofounder of Moody’s Economy.com, an independent subsidiary of Moody’s that provides economic research and consulting services to businesses, governments, and other institutions. His recent research has included studying determinants of mortgage foreclosure and personal bankruptcy; analyzing economic impacts of tax and government spending policies; and assessing policy responses to bubbles in asset markets. He has appeared on NBC’s Meet the Press, NBC News, CBS News, CNN, CNBC, and has served as an economic advisor to John McCain’s presidential campaign and the Obama administration. Zandi holds a Ph.D. from the University of Pennsylvania where he did research with Gerard Adams and Nobel Laureate Lawrence Klein.

Table of Contents

Acknowledgmentsp. viii
About the Authorp. ix
Introductionp. 1
Subprime Precisp. 9
Sizing Up Subprimep. 33
Everyone Should Own a Homep. 49
Chairman Greenspan Counts on Housingp. 67
Global Money Men Want a Piecep. 81
Bad Lenders Drive Out the Goodp. 97
Financial Engineers and Their Creationsp. 113
Home Builders Run Agroundp. 131
As the Regulatory Cycle Turnsp. 145
Boom, Bubble, Bust, and Crashp. 161
Credit Crunchp. 175
Timid Policymakers Turn Boldp. 193
Economic Falloutp. 233
Back to the Futurep. 251
Endnotesp. 273
Indexp. 285
Table of Contents provided by Ingram. All Rights Reserved.


Praise for Financial Shock Praise for Financial Shock"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." David Leonhardt, The New York Times"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"Mark Zandi provides insightful analysis, thoughtful recommendations, and a comprehensible explanation of the financial crisis that is accessible to the general public and extremely useful to those who specialize in the area." Barney Frank, Chairman, House Financial Services Committee"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 Introduction"If it's growing like a weed, it's probably a weed." So I was once told by the CEO of a major financial institution. He was talking about the credit card business in the mid-1990s, a time when lenders were mailing out new cards with abandon and cardholders were piling up huge debts. He was worried, and correctly so. Debt-swollen households were soon filing for bankruptcy at a record rate, contributing to the financial crisis that ultimately culminated in the collapse of mega hedge fund Long-Term Capital Management. The CEO's bank didn't survive.A decade later, the world was engulfed by an even more severe financial crisis. This time the weed was the subprime mortgage: a loan to someone with a less-than-perfect credit history.Financial crises are disconcerting events. At first they seem impenetrable, even as their damage undeniably grows and becomes increasingly widespread. Behind the confusion often lie esoteric and complicated financial institutions and instruments: program trading during the 1987 stock market crash, junk corporate bonds in the savings and loan debacle in the early 1990s, the Thai baht and Russian bonds in the late 1990s, and the technology-stock bust at the turn of the millennium.Yet the genesis of the subprime financial shock has been even more baffling than past crises. Lending money to American home buyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century. How could so many mortgages have gone bad? And even if they did, how could even a couple of trillion dollars in bad loans derail a global financial system that is valued in the hundreds of trillions?Adding to the puzzlement is the complexity of the financial institutions and securities involved in the subprime financial shock. What are subprime, Alt-A, and jumbo IO mortgages; asset-backed securities; CDOs; CPDOs; CDSs; and SIVs? How did this meacute;lange of acronyms lead to plunging house prices, soaring foreclosures, wobbling stock markets, inflation, and r

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