It seems that any diagnosis of the causal factors of the 2008 Financial Crisis and ensuing recession ultimately becomes political. There is enough blame to go around to craft whatever narrative fits your ideology. However, most reasonable people understand that great global events are often years and decades in the making. The authors of this book do what few others seem to have been willing to do, which is to take an historical and apolitical view at the roots of the housing bubble, the bursting of it, the ensuing financial instability and ultimately the Great Recession.
This is not a book written by pundits for zealots. We know those books. This is not those. This is straight-shooting investigative journalism from reporters at the New York Times, which is anything but a right-wing think tank. It is not a whitewash or a scapegoating. It is what happened, pure and simple, warts and all. If you want to get the facts from an unassailable source, this is probably it.
What they find is not "new news" to those (like myself) who have studied this issue, but it is perhaps the most compelling and well-researched version of events that gains in credibility by not being the manufacture of a left or right wing think tank. Instead, this version is based on accounts and testimony of insiders and industry stalwarts who span all corners of the political spectrum. To many conservatives this will confirm suspicions long-held by many that key Democrats and left-wing influence groups played instrumental roles in creating the conditions for the crisis. However, the authors are quick to note that this crisis did not occur because of the ineptitude of incompetence of a single political party, it came about as a result of a new political machinery that both parties paid homage to, even if slightly more Democrats than Republicans. Although Democrats are more central to the causes of the boom, Republicans had political reasons to simply pay lip-service to reform and look the other way as their own interests seemed to be aligned with the housing boom as well.
Today the conventional wisdom is that the recession was caused by unregulated Wall Street greed and some unspoken economic policy that Bush must have enacted, like the Bush Tax cuts. It is clear that this view will not stand the test of historical investigation. Wall Street was greedy, but that was always true and always will be true. That was never causal. Regulation was certainly a factor, but not the lack of it. Regulators pushed financial institutions to make large bets on housing and actively encouraged it--it was their mandate to do so. Flawed studies overstated the level of discrimination in the housing market. It is true that some regulations went ignored, but not regulations that could have or would have prevented any of this. Subprime mortgages were no secret. Relaxed lending standards were not regulatory oversights, they were policy. This policy regime did not start with Bush, and once in motion it's inertia was simply irresistable to any politician. Too many influential interests groups from across the ideological spectrum had too much staked on the inertia of the status quo.
This work will prove instrumental into reshaping this flawed conventional wisdom over time. Demagogues on both sides of the aisle will distort reality, but this book will be there for history. History will point to a cadre of ambitious and somewhat nefarious executives within the environs of the GSE's (Fannie Mae principally) who used the trappings of Government favor and political influence to create the conditions for crisis. The politicians alluded to (Barney Frank, Chris Dodd, and various members of the Clinton Administration) were important brokers who generally meant well, and undoubtedly had no clue of the Leviathan they were unleashing. Clinton-era officials certainly own the creation of the Housing Industrial Complex and the infrastructure that fuelled it, but it is the members of Congress who protected the insanity of it all to the last that deserve the treatment they get.
For their part, Bush-era officials saw dangers and did halfheartedly propose reforms but politically were unlikely to do anything to derail the economy in 2003-2004 when it might have mattered. Housing was leading the recovery and they knew it, and so let inertia continue apace. They also created an array of mostly tiny programs that did nothing tangible other than allow Bush to take credit for rising home ownership. They can be blamed for lacking courage, but really contributed nothing causal.
To summarize, an understanding of the economic crisis is incomplete without reading this book. It is not the whole story, but it is the part that matters most, because it focuses on what changed in housing. The Housing Bubble began in 1997, and most people do not know that. Other factors like low-interests rates driven by the Fed, excess savings from abroad had their role, but they were catalysts, not causes. Low interest rates did not cause housing bubbles in the past. Wall Street greed did not cause housing bubbles in the past. International currency flows did not cause housing bubbles in the past. Something changed in housing to help cause this.
To know this crisis, you have to know what changed in housing. This book tells that important tale. It is a must read.
***Note: To those commenters who are whining about "fact-checking" they are whining about a few obvious typos. Those reviews are useless. It is pretty clear that these authors are aware of when Kerry ran for President. Some commenters have an agenda, and a typo is not a reason to give one star.
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Top reviews from other countries
DOPPLEGANGER
"A SPONGY CONDUIT"....
Reviewed in the United Kingdom on December 14, 2012Dr. Keith Meloff
An excruciating expose of Wall-Street and Federal Reserve and Political and SEC misdeeds- read it and weep!
Reviewed in Canada on June 28, 2018
Stuart Parkinson, Eliffile
Great book; pity that so many lessons remain unlearnt
Reviewed in the United Kingdom on March 2, 2017