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Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable Hardcover – January 20, 2010
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In Complicit: How greed and collusion made the credit crisis unstoppable, he explains why. The securities industry grew with leaps and bounds over the past few years and society as a whole reaped the rewards of freely available credit at super-low interest rates. The global financial authorities like the government, the banks and the money managers all looked the other way while lining their pockets.
The list of those to blame doesn't stop there. Realtors freely took advantage of the increase in home buying and appraised houses at fictitious levels. Banks and credit unions lent money to people who had no hope of paying back their mortgages. Homeowners bought properties at rates they knew they wouldn't be able to afford to repay. The average price of a U.S. single family home doubled in the period from 1989 to 2003 from $113,000 to $229,000.
In 2006, at the same time the US housing marketed rocketed, the global derivatives market grew at the fastest pace on record. The total outstanding amount grew by 40% to an amazing $415 trillion according to Gilbert. This uncheck growth could only continue as long as people kept ignorning the warning signs of a coming collapse. In 2006, some markets began to make the connection and the impact of years of risky financial decisions began to be felt.
Mark Gilbert offers an in depth explanation of how this credit crisis grew to the point where it was felt around the world.Read more ›
None of the "I single-handedy invented the CDO market" or "I told you it was going to happen in my previous book" rubbish but an in-depth explanation from a man who was sat in the Bloomberg news room watching it all unfold.
"Complicit" has the potential to be compulsory reading for future generations wishing to try and learn from the mistakes that were made.
Chapter 1 explains how real estate values were completely overinflated and made for an attractive investment as the stock market was stagnant at the time. It was an investing crazy with no thought to risk behind it. It further explains how banks that made mortgage loans no longer had a stake in the risks as the debts were sold off to investors therefore the bank had no further risk once they were sold off. Home owners also used their houses as ATM machines continually drawing on the equity. All the while, history teaches us what goes up must come down. All the players bet on values just going up and up.Read more ›
Bloomberg columnists are typically good writers, with detailed knowledge of their subject areas, and a no-nonsense approach to writing. This book from Mark Gilbert is no different. As Joe Friday often said, "All we want are the facts, ma'am."
And for the most part, that's what you get in Complicit. It is not a long book at 173 pages, but it comprehensively chronicles the growth in leverage, and how it spread to many areas of the investment markets.
When bubbles grow, everyone is a friend. Underwriting becomes lax, limits are stretchable, FICO scores are pessimistic approximations, etc. Risk is transitory; we originate to sell. Regulators don't want to stand in the way of seeming prosperity. Nor do politicians.
Leverage gets higher in explicit and implicit ways. Credit spreads get tight as a drum. It is a virtuous cycle... until it become a vicious cycle.
In the bust, credit spreads rise, cutting off the possibility of refinancing. Then asset defaults come, and GSE and bank insolvencies.
Central banks did not view inflation broadly enough, focusing on goods price inflation, and ignoring the asset inflation that was distorting the economy. They disclaimed an ability to see, much less deal with bubbles.
The high yield market became a frenzy for yield, with CDO equity bidding for lousy bonds and default protection on lousy corporations. Debt spreads tightened to levels that indicated perfection had arrived.Read more ›
Most Recent Customer Reviews
This is the clearest book I have read about the 2007 financial crisis. The author takes a more global view than most and puts the crisis in the context of too much liquidity, low... Read morePublished on February 9, 2013 by John Mccarrier
COMPLICIT: HOW GREED AND COLLUSION MADE THE CREDIT CRISIS UNSTOPPABLE examines the credit crisis and how the problems of subprime debt took down institutions and large parts of the... Read morePublished on May 16, 2010 by Midwest Book Review
Complicit, by Mark Gilbert, the London bureau chief for Bloomberg financial news, is unusual -- a book concerning our recently demised speculative boom that you can still take... Read morePublished on March 1, 2010 by Christopher J. Maloney
Complicit is a must read for market practitioners and those with a more general interest. For so-called professionals Mark Gilbert has produced a compact, yet detailed, analysis of... Read morePublished on February 27, 2010 by S. J. Major