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Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis Hardcover – July 19, 2008


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Product Details

  • Hardcover: 288 pages
  • Publisher: FT Press; 1 edition (July 19, 2008)
  • Language: English
  • ISBN-10: 0137142900
  • ISBN-13: 978-0137142903
  • Product Dimensions: 6.2 x 1 x 9.3 inches
  • Shipping Weight: 1.7 pounds
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (103 customer reviews)
  • Amazon Best Sellers Rank: #1,673,931 in Books (See Top 100 in Books)

Editorial Reviews

Review

As seen on NBC's Meet the Press, CBS Sunday Morning, CNN's Your $$$$$, CNN's Issue #1, CNBC's Squawk Box, CNBC's Kudlow & Company and Fox Business with Dagen McDowell

"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


From the Back Cover

“The obvious place to start is the financial crisis and the clearest guide to it that I've read isFinancial Shockby Mark Zandi. ... it is an impressively lucid guide to the big issues.”

The New York Times

 

“InFinancial 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
See all Editorial Reviews

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Customer Reviews

This book is very well written and provides an understanding for readers at all levels.
Sidney Patelson
If you want to understand what happened, why, and what is likely to happen going forward this is the book to read.
John Anthony
"Financial Shock" by Mark Zandi is a highly readable account of the subprime financial crisis.
Malvin

Most Helpful Customer Reviews

51 of 53 people found the following review helpful By Dale C. Maley VINE VOICE on September 4, 2008
Format: Hardcover Vine Customer Review of Free Product ( What's this? )
In this age of full disclosure, I received this book free from the Amazon Vine program....with the condition that I publish a book review.

I may have purchased this book anyway. Back in the middle of 2007 when the sub-prime problem first surfaced......I remember a talking head on TV saying the sub-prime issue would not become a problem. His rationale was that sub-prime only represented a single digit percentage of the total mortgage market......and therefore it would have no major impact on financial markets......even if all sub-prime debt went bad. Boy was he wrong!! I have been curious how the sub-prime fiasco almost brought down the entire world financial markets.

Another disclaimer is that I have not personally been involved much with mortgage loans. My first mortgage was back in 1978. It was a 30 year fixed mortgage, and since I only put 10% down, it was mandatory to have mortgage insurance......until my equity reached 20%. I got additional 30 year fixed mortgages in 1980, 1994, and 1995 due to job location changes. In 1999, I got a variable rate loan on a new home.......put 50% down......and then converted to a 15 year fixed rate in early 2007. I also live in Illinois, not one of the national hotbed markets for sub-prime lending.

Zandi says there has been a financial markets panic about every 10 years. He predicts the next one will involve U.S. government debt with all our under-funded liabilities. Other authors have said there is a stock market crisis about every 25 years........because it takes this long for the "burned" generation to retire and be replaced with youngsters who have no memory of the last bubble.

Zandi explains the sequence of the sub-prime fiasco like this:

1.
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15 of 16 people found the following review helpful By Kathleen San Martino TOP 500 REVIEWERVINE VOICE on August 30, 2008
Format: Hardcover Vine Customer Review of Free Product ( What's this? )
I've learned how securitization, unsavory lending, lies by borrowers and lenders, the effect home flippers had on the market, the accounting standard of "mark to market," and other various lending practices and financial instruments have caused the economic havoc we are now experiencing. Lenders are currently leary of lending money to financially sound borrowers due to fears of further financial crises. There are also more rigid lending criteria which further compounds the problem.

The author does a fantastic job of explaining the complexity that evolved in the mortgage market over the last 10+ years. As a result, this book is a plethora of information on how the housing crisis has snowballed into what we are experiencing now.

The author explains everything in detail in an engaging and easy-to-understand narrative that even the most financially illerate person can understand. I would have rated this book TEN STARS if that option were available. "Financial Shock" is an outstanding text!
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6 of 6 people found the following review helpful By Alice in Wonderland TOP 1000 REVIEWERVINE VOICE on September 24, 2008
Format: Hardcover Vine Customer Review of Free Product ( What's this? )
The present financial crisis seems to never stop echoing and reechoing through the American, and indeed world, economy. But, what really happened? In this book, author and economist Mark Zandi, takes an in-depth look at what happened, how and why.

Now, I did find this to be a very interesting book, one that really opened my eyes on what has been going on, and what is still going on. Admittedly, towards the middle, the book got a little too technical for me, but one cannot look at a problem as broad and deep as this without getting technical somewhere along the line.

If you want to understand how we got to where we are, and what steps we need to take, then you really must read this book. I do recommend it to everyone.

(Review of Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis)
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13 of 16 people found the following review helpful By Al VINE VOICE on October 16, 2008
Format: Hardcover Vine Customer Review of Free Product ( What's this? )
If the book had been written four months later, it may have been more relevant. It is a partial primer for college educated professionals and policy makers who want to understand the mechanisms behind the financial current crisis. However, it is missing a large chunk of recent events as well as the credit rating agencies' role in the crisis.

Most economists agree that the incestuous relationship between credit
ratings companies and bond issuers are a significant factor to the current economic meltdown. Being employed by Moodys, the author could not comment. The cup is about 1/4 full, and I recommend that you wait for a more unbiased opinion.
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7 of 8 people found the following review helpful By James Macdonald on December 29, 2008
Format: Hardcover
On a positive note, this book provides a good explanation of how the current financial crisis developed. Published in July 2008, it necessarily misses many of the huge developments that have occurred in recent months. To be fair, let's give Mr. Zandi credit for accurately predicting upcoming problems in the CDS market - see page 230. He is also the first critic I have found that notes the role of REITs in this crisis.

However, as many of the reviews have noted, there are numerous shortcomings that seriously limit the value of this work. His ten recommendations are in most cases absurdly simplistic (with the exception of revising mar to market rules),e.g. suggesting that people get better education on financial issues. His announcement that the worst is over has also proven to be hopelessly optimistic.

Here are some of the really important questions that Zandi ignores (in the first case intentionally):

1. How could both financial rating agencies (like S&P and Moody's) and CPA auditors completely miss the nature of the correlated risks that were emerging, especially given the repeated use of off balance sheet special purpose vehicles that were much publicized in the Enron collapse?

2. What are the implications of these failures to the Sarbanes Oxley law - has this legislation done anything positive? Or should it be repealed? What are the lessons learned here?

3. In a similar vein, what about the role of GLB ("financial modernization") law and the repeal of Glass Steagle - should this law be re-invoked?

4. What is the new normalcy that we can expect over the next decade?
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