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The Housing Boom and Bust Hardcover – January 1, 2009
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- Item Weight : 1 pounds
- ASIN : B003NHR6WC
- Publisher : Basic Books; Revised ed. edition (January 1, 2009)
- Language: : English
- Best Sellers Rank: #3,902,052 in Books (See Top 100 in Books)
- Customer Reviews:
Top reviews from the United States
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1) Zoning and other restrictions on land use that caused severe land shortages and upward-spiraling home prices.
2) Government pressure on lenders to give housing loans to borrowers without adequate down-payments (NINJA loans = No Income, No Job, No Assets)in the name of "affordable housing" used by some politicians to buy the votes of the poor and of the "bleeding hearts."
3) Why would banks make bad loans, on which they would lose money? Because government gave them a place to dump toxic loans - namely the "government-sponsored-entities" (GSE's) named Fannie Mae and Freddie Mac, which ended up with half of all the subprime loans in the USA, and which ended up hugely bankrupt and bailed out by billions of taxpayer dollars.
There is much more in the book, but this gives just a little flavor of how government caused the housing crisis, and how taxpayers got stuck with paying for it. If you really want to understand what happened, and why, this book will explain it clearly and understandably, step by step, in plain and simple language.
The frightening part is that those in government who put the practices into place that led to the economy collapsing like a house of cards are still in power and running things in Congress, and the new administration sees the crisis as an excuse to implement policies that will have far reaching effects on the future of this country.
If there is one flaw in the book I would have liked Sowell to go into detail about the use of subprime backed securities that caused toxic assests to infiltrate every aspect of our economy and the economy of the world.
I mention this because I suspect many folks considering this book are NOT economics majors and want a book that explains things very clearly. If that describes you, Sowell will surpass your expectations. This book is very well-written, his arguments are persuasive and intelligent but you don't have to have any background to appreciate them.
While Sowell's book is very readable for non-economics majors, I would also say that econ and finance majors will not feel that Sowell is condescending to them; I have used this book in an upper level course for econ and finance majors, and the students gave the book high marks.
The title accurately describes the scope of the book - it contains little to no discussion of credit default swaps and collateralized default obligations, does not talk too much about the credit crunch, the "shadow banking sector" and other aspects of the economic crisis. He focuses on the housing bubble, which of course is not entire crisis but is at the very heart of the crisis.
And just in case you didn't pick this up from the other reviews here, Sowell writes from a very conservative perspective. I'm pretty centrist, but I like reading and being challenged by the great thinkers from different perspectives.
My only caution to the young reader of Sowell is to not jump to the conclusion that Sowell's perspective is "the" correct perspective, but rather treat it as a very valuable perspective that we can all learn from, but also seek out other insightful perspectives, such as Krugman's "Return of Depression Economics", Posner's "A Failure of Capitalism", and the new book by Joseph Stiglitz called "Freefall: America, Free Markets, and the Sinking of the World Economy."
Top reviews from other countries
The bust is easy to explain- house prices rises vastly exceeded gains in income, population or productivity so could not be sustained. A bust was inevitable, explaining the boom is the tricky part.
Contrary to popular dogma the boom wasn't fueled by 'deregulation' or the free market but was brought into being by the government interventions- whether in restricting land use or coercing banks to drop lending standards.
I won't attempt to rehash the entire book but Sowell looks at the impact of all the main players- the banks, the federal government, Fannie & Freddie and the regulators and explains how they each interacted to cause this failure. Unsurprisingly politicians come outparticularly badly.
The book probably was rushed out by the publishers soon after the crisis came to a head in late 2008 and early 2009, hence the awkward lack of numbered end notes (there is a chapter by chapter list of sources but it is much harder to cross reference). However the analysis doesn't really suffer because Sowell has been writing about aspects of the crisis for years before the actual crash.