The Subprime Virus: Reckless Credit, Regulatory Failure, and Next Steps [Hardcover]

Kathleen C. Engel (Author), Patricia A. McCoy (Author)

Book Description

Publication Date: January 26, 2011

The subprime crisis shook the American economy to its core. How did it happen? Where was the government? Did anyone see the crisis coming? Will the new financial reforms avoid a repeat performance?

In this lively new book, Kathleen C. Engel and Patricia A. McCoy answer these questions as they tell the story behind the subprime crisis. The authors, experts in the law and the economics of financial regulation and consumer lending, offer a sharply reasoned, but accessible account of the actions that produced the greatest economic collapse since the Great Depression. The Subprime Virus reveals how consumer abuses in a once obscure corner of the home mortgage market led to the near meltdown of the world's financial system. The authors also delve into the roles of federal banking and securities regulators, who knew of lenders' hazardous mortgages and of Wall Street's addiction to high stakes financing, but did nothing until the crisis erupted. This is the first book to offer a comprehensive description of the government's failure to act and to analyze the financial reform legislation of 2010.

Blending expert analysis, vivid examples, and clear prose, Engel and McCoy offer an informed portrait of the political and financial failures that led to the crisis. Equally important, they show how we can draw lessons from the crisis to inform the building of a new, more stable, prosperous, and just financial order.

Editorial Reviews

Review

"A valuable one-stop resource.... In the recent glut of titles on the subprime-mortgage crisis, this book fills the gap between watered-down pop accounts and esoteric economic analyses."--Library Journal

"An excellent book."--Steven Davidoff, The New York Times

"Masterful and devastating. From the subprime neighborhoods to Wall Street and Washington, Engel and McCoy trace the fraud, incompetence, greed and negligence that wrecked the world economy, the American financial system, and the wealth of millions. This book should be on every prosecutor's must-read list."--James K. Galbraith, author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too

"The critical and oft-neglected fact of the [recent economic] crisis rests in the deep connections between the worlds of consumer risk and systemic risk. These connections are both the central metaphor and the driving analytic framework for a perceptive new book by legal scholars Kathleen Engel and Patricia McCoy.... [They] have provided...the best account of the mortgage market roots of our financial collapse....it redirects attention and analysis to consumers--that is, the middle and lower classes. The authors focus some badly needed attention on the human carnage wrought by the collapse of the mortgage market itself."--Daniel Carpenter, Democracy Today

"Many excellent books on the bubble and ensuing [financial] crisis have appeared.... It was to The Subprime Crisis, however, that the American College of Consumer Financial Services Lawyers gave its book award, most likely because of this book's unique combination of detail, coverage, and style. This may be the only book that looks at the entire business of residential lending, financial regulation, and corrective legislation."--Business Law Today

"Like time lapse photography, Engel and McCoy demonstrate in bold relief how greed and ideology combined to enable the subprime crisis to buckle the knees of the American and global economies. Their meticulously documented and lively account of how questionable retail lending practices fed an out-of-control Wall Street money machine suggests there's plenty of blame to go around. However, the book reinforced my personal view that the regulators could have nipped this crisis in the bud, and that their bottom line message is that policymakers whose sacred trust was to protect the public interest, failed miserably in their jobs. In addition to a readily understandable story of economic contagion, The Subprime Virus is an outstanding example of how industry capture can corrupt and render ineffective our regulatory institutions."--Michael A. Stegman, Ph.D., Director of Policy and Housing, The John D. and Catherine T. MacArthur Foundation

"Kathleen Engel and Patricia McCoy were writing about the perils of subprime lending and predicting the failure of the subprime market well before 2007. In this book, Professors Engel and McCoy explain the wide-spread regulatory failures which allowed the 'subprime virus' to grow and fester. Their policy recommendations and prescriptions for regulatory reform are lucid and common-sense solutions designed to prevent a recurrence of the reckless lending which caused the subprime virus. Government officials, academics, and anyone with an interest in preventing another subprime crisis should take heed."--Steven M. Davidoff, Professor of Law, The Ohio State University

"Kathleen Engel and Patricia McCoy deserve tremendous credit for being amongst the first to identify the problems of subprime lending and the risks inherent in financing ever growing numbers of low quality mortgages through asset securitization. Nearly a decade ago, they were prescient in foreseeing the toxic potential of combining predatory lending with capital market financing. In this insightful new volume, McCoy and Engel retrace the battles they waged against unscrupulous lending practices and the unwillingness of regulatory authorities to heed their warnings. In so doing, they lay bear the roots of the subprime crisis and offer a host of sensible reform proposals. This time, one can only hope, public authorities will listen."--Howell E. Jackson, James S. Reid Jr. Professor of Law, Harvard Law School

About the Author

Kathleen Engel, the Associate Dean for Intellectual Life and Professor of Law at Suffolk University Law School, is a national authority on mortgage finance and regulation, subprime and predatory lending, and housing discrimination. Professor Engel's research on financial services markets and the laws that regulate them regularly catches the attention of the press and she presents her research in academic, banking, and policy forums throughout the country and around the world.

Patricia A. McCoy, an expert on financial services regulation, is the Connecticut Mutual Professor of Law and Director of the Insurance Law Center at the University of Connecticut. Professor McCoy analyzes consumer protection, moral hazard, and systemic risk through the lens of law, economics, and empirical methods. Her work on the subprime market has garnered national press attention and repeated invitations to testify before Congress.

Product Details

• Hardcover: 368 pages
• Publisher: Oxford University Press, USA (January 26, 2011)
• Language: English
• ISBN-10: 0195388828
• ISBN-13: 978-0195388824
• Product Dimensions: 6.1 x 1 x 9.2 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (5 customer reviews)
• Amazon Best Sellers Rank: #971,429 in Books (See Top 100 in Books)

More About the Author

Discover books, learn about writers, read author blogs, and more.

Most Helpful Customer Reviews

7 of 7 people found the following review helpful

5.0 out of 5 stars One Hell of a Whodunit and Why (Money, of course) February 16, 2011

By FiscalConservative-SocialLiberal

Format:Hardcover|Amazon Verified Purchase

I'm only one third of the way through the book, but this eminently readable and comprehensive compilation of errors and events that got the US (and the world) into this serious financial meltdown is impressive. The accounts of the Bush and Obama administrations' efforts to quell the collapse is fascinating. You feel that you are living the history, standing at the edge of the abyss. Hardly a book that I expect from two distinguished law professors! It's readable, highly informative and fascinating.

This book is neither an economic tome nor a populist screed. Any reasonably open-minded citizen will gain perspective, insight and a balanced understanding of what went wrong and why.

If the "what to do about it" portion of the book is similarly powerful, it should already be a classic.

3 of 3 people found the following review helpful

5.0 out of 5 stars Should be required reading for political science and econ majors July 16, 2011

By R. Alembik

Format:Hardcover|Amazon Verified Purchase

This is an engaging and informative work that manages to be sophisticated, but not pedantic. It would make a good 200- or 300-level college political science or econ text. Anyone who would debate the good or bad side of government regulation should be required to read and address the arguments and observations made in this book before engaging in any sort of debate. I was a political science major in college and am now an attorney. I've always had difficulty grasping how financial institutions are regulated... despite efforts to learn on my own. This book finally clarified what some might argue is the unclarifiable: our financial regulatory scheme. The "plot" development in the context of the meltdown reads like any good fiction. What's tragic is that it's NOT fiction. In fact, it looks more like history that's about to repeat itself... again.

10 of 14 people found the following review helpful

5.0 out of 5 stars Very good treatment of a complex topic January 17, 2011

By L. Wick VINE™ VOICE

Format:Hardcover

The authors have done an excellent job of covering every aspect of the crisis. Oddly, another reviewer mentions their neglect of the CRA. As the CRA was only an American law, it doesn't seem relevant to a problem that broke out in a great many countries simultaneously for roughly the same reasons. And he had the audacity to accuse these authors of trying to shift the blame! Just another bit of right-wing delusion. It's surprising how many nutjob apologists have sprung up to defend the predatory lending practices that their libertarian philosophy has engendered. In any case, the authors of this book understand the crisis and do an excellent job of describing how it unfolded, their clear explanation rising well above the noise generated by Beck and his mindless followers.