Mr.Lowenstein is the best writer of financial events. (Read "when Genius Failed" about the 1998 financial crash) As a result, I strongly encourage everyone, especially Senators, congresspersons and Obama administration officials, to read this book in order to learn what really caused the financial crisis and the need for government bailouts. One of the problems that exists today is that Wall Street is the target of criticism and severe legislation, while in reality, the cause of the crisis was that the average person who decided to participate in the property price boom by buying a home decided to walk away from their responsibility to pay mortgage payments once the value of the property went down instead of up. This change in ethics by the average American is what caused the crisis and will influence mortgage lending for many years. Banks will not be fooled in the future into thinking that a mortgage contract is really worth anything if the home price it is based on goes down. This will limit who will be able to qualify for a mortgage in the future, how much of a down payment they will need to make, and will increase the interest rates that they will have to pay. All of these changes will occur because the new American will default on his or her mortgage without thinking twice about it. The American of past decades would still be making mortgage payments and home prices would not be in chaos like they are today.
It is very important that Senators, Congressmen and Congresswomen, and Obama appointed regulators read this book and understand the cause of the crisis. If they do not, then they will continue to try to put the blame, quite stupidly, on the banks that made that loans, rather than on the millions of Americans who decided that they would not pay their mortgage, but would continue to pay their cell phone bills, cable TV bills, and car payments. The home mortgage payment used to be the most important payment that the average American would pay each month because they did not want to lose their home. In this new age of the homeowner being a speculator in real estate first and a true homeowner second, banks will be forced to increase interest rates on new mortgages to price for the high risk of defaults that will occur if the price of the home declines regardless with what happens to the homeowner him/herself. People with good jobs have been walking away from paying their mortgages because they can make money by doing it. This is the root of the financial crisis and why Fannie Mae and Freddie Mac, America's two government agencies that support the mortgage market, have been placed into conservatorship and have been bankrupt for almost 2 years. The government was not bailing out Wall Street banks last year and the year before, the government was bailing out all of the people who decided that they would be better off if they simply stopped paying the mortgage and left the house to the banks.
The financial markets are just as sensitive of an ecosystem within the US economy as the marshlands are to the populations of fish that they support. If we attack the banks and Wall Street incorrectly as the cause of the financial crisis, then it will be like plowing under all of the marshlands around the US and expecting an improvement in the numbers of fish that will be caught in the oceans and bays that they support. That is why this book is a must read. After you read it, then email or write your congressperson and protest the attacks on Wall Street, especially the misguided derivatives reform that is trying to move derivatives away from Banks that can manage the risk to other institutions that cannot. If we do not correct the real problem then, in the future, anyone who misses so much as a telephone bill due date will see their ability to get a mortgage impaired, and if they can get one, it will be certain that they will pay one or two percent higher for the next 30 years as a result of that missed telephone bill payment. Bank will be looking for even the slightest hint that someone will walk away from his or her mortgage payments. As an example of how much more difficult it is to get a mortgage, one twenties something college graduate I know, who has a good paying job in Web design had to by a camper to live in for all cash because he could not get a mortgage. The reason he could not get a mortgage was that he missed the due dates on his credit cards a few times. This is just one example, but it will only get worse if we continue to degrade Wall Street and subject Wall Street firms to nonsense legislation like the new derivatives reform. The OTC derivatives reform is pure nonsense and is trying to capitalize on the fact that the average person does not understand them. The Obama administration and the Democrats have figured out that they will win votes if they punish and humiliate these institutions. In reality, OTC derivative reforms will only shift the risk of derivatives to clearing brokers and clearinghouses that cannot possibly manage the risk and will fail in the next financial crisis. In summary, the American people must stop the misguided derivatives reform that is being pushed through the Senate by the Obama Administration to win the votes of those people who do not understand what really caused the crisis.
In summary, it is the capability of Wall Street to provide capital to companies and individuals (for home and car purchases) so effectively that has made America a great country over the last 200 years. If we did not have this fabulous resource for capital (i.e., getting money to invest in things or buy long term assets like homes and cars) then America would not be as strong in the world as it is. Who do you think provided the capital for Microsoft, Google, Intel, Amazon, and Apple over the years? Yes, it was Wall Street. So now Congress wants to beat them to death with adverse legislation, because the people who borrowed money to buy homes got that money from major banks and investment banks on Wall Street. The American people need to wake up fast before the lynching of Wall Street is completed by the new financial reform bill and understand that it was the people who decided to walk away from their responsibilities to pay their mortgage payments that caused the crisis and not Wall Street who provided the money to these people to buy the home. This is like shooting the messenger and not the sender of the message. In the new world of American priorities, the cell phone bill and the cable TV bill have migrated to become the most important bills that Americans will pay each month. The mortgage payment bill gets thrown into the trash can if the home price has declined, and after they throw it into the trash, the home buyer calls their congressperson and asks for a new law to be passed that forces the banks that provided the mortgages to provide forgiveness (or a reduction of principal amount) of the mortgage by congressional action. If we harm the major banks and investment banks that made the loans available to America to make it an industrial power in the world, then like with the marshlands example, we will be harming ourselves by making mortgages for home purchases too hard to get and too expensive. Home prices will feel that lack of buying ability and will languish for 10 to 20 years at present levels. Banks will turn into telephone companies or the post office and will be beaten in their own business by foreign financial firms that will take over in America. Just think of it, the new financial reform bill may lead to America having a branch of the First National Bank of China or The First National Bank of France on every corner. America needs to stop the financial reform bill and save our major banks and investment banks from being irreparably damage by Congress and the Obama administration. This legislation will only harm average Americans who may very well see all of their kids living in campers because they cannot get mortgages. Save the Whales, save the marshlands and save our fabulous Wall Street financial institutions that have made America the country that it is by providing financing efficiently and effectively to all who need it. We just need to change our focus to be one of getting people who take out mortgages to pay their mortgage payment first again and give up their cell phone, internet connection, cable TV and even their cars before they can get off the hook of making their mortgage payment.
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Top reviews from other countries
Molten Beaks
You won't find a better account of the financial crisis
Reviewed in the United Kingdom 🇬🇧 on November 1, 2016Mrs. Merylin Zein
Absolutely gripping. I felt as if I had been ...
Reviewed in the United Kingdom 🇬🇧 on June 11, 2018Trading Central
Better Title Would Be "Creative Destruction on Wall Street"
Reviewed in Canada 🇨🇦 on April 18, 2013
