Financial Shock: A 360 Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis | 
 enlarge | Author: Mark Zandi
Publisher: FT Press
Category: Book
List Price: $24.99
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Avg. Customer Rating:  51 reviews
Sales Rank: 627
Media: Hardcover
Edition: 1
Number Of Items: 1
Pages: 288
Shipping Weight (lbs): 1.7
Dimensions (in): 9.1 x 6.1 x 0.9
ISBN: 0137142900
Dewey Decimal Number: 332.7220973
EAN: 9780137142903
ASIN: 0137142900
Publication Date: July 19, 2008
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Product Description
From the Back Cover The subprime financial crisis is the decade's #1 financial story. What happened? How did it occur? And how can we prevent similar crises from happening again? Dr. Mark Zandi answers all these critical questions - systematically, carefully, and in plain English. Zandi begins with a fast-paced "history" of the crisis: where it started, how it spread, and where the fallout has landed. Next, he illuminates its deepest causes, ranging from the psychology of homeownership to Alan Greenspan's missteps. You'll watch the "flippers" at work and the real estate agents who cheered them on. You'll learn how Internet technology and access to global capital transformed mortgage lending, helping irresponsible lenders "drive out" good ones. Zandi demystifies the complex financial engineering that enabled lenders to hide growing risks and shows how global investors eagerly bought in, despite key warning signs. You'll discover how homebuilders contributed to the crisis, and how flummoxed regulators and policymakers failed to prevent it. Zandi offers indispensable advice for investors who must recognize emerging bubbles, policymakers who must improve oversight and citizens who must reduce their risks, so they can survive whatever comes next.
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| Customer Reviews: Read 46 more reviews...
 Good primer on the subprime meltdown October 12, 2008
1 out of 1 found this review helpful
These are tense times in America. Times that require a moment of reflection before I get to the meat of this review. As I write, the stock market has taken a record-breaking one-week panic-driven nosedive that has wiped out over a trillion dollars of investor wealth. This comes a week after the House voted to approve a 700 billion dollar stimulus bill to try to reopen clogged credit markets by reinfusing cash into the capital-parched banking system. World financial markets are in turmoil, threatening emerging economies and crippling stock markets worldwide. How did things get so bad? What can be done to steady the markets and the banking industry? Some of those answers can be found in author Mark Zandi's book "Financial Shock".
Zandi is the Chief Economist and Cofounder of Moody's [...], a subsidiary of Moody's that provides consulting services to various financial and financially-related businesses. The strength of his analysis relies on the fact that he's writing from the perspective of an insider. His basic premise looks a little bit like this: overheated housing markets and easy access to increasingly risky forms of credit led would-be homeowners and lenders into a giddy state of denial. Everyone seemed to think that the good times and the heady price increases (and the profits that went with them) could go on indefinitely. The bad news, of course, is that price bubbles inevitably pop, and when the housing bubble burst, it began to send the credit industry and the players who supported it (banks, brokers, foreign investors, insurance companies, bonds traders) into a financial tailspin, the effects of which are still being felt today, painfully so for many of us. Zandi, of course, explains this in much greater depth of detail.
I liked this book because Zandi keeps his analysis simple and straightforward. It's a fairly short read at 243 pages, but there's a lot of information packed into the text. Zandi supports his ideas with charts and data, and he leaves the politics out and takes a non-partisan approach to the proceedings. He lays his facts on the table and finishes up by making some good suggestions on how to solve some of the issues at hand. The only weak spot was his inability to explain how the securities ratings industry played a role in this mess, but early in the book he cites conflict of interest issues as a reason for this omission (his parent company, Moody's, is a securities rater, after all, so I can see why he decided not to explore this avenue of thought. It still would have been nice to have some insight on this factor, though).
Information is power, and consumers will need to have as much information as possible in the days ahead. This is not a time to panic, rather it is a time for careful introspection and knowledge. Knowing how we got here will help us to chart a course out of the deep water. This book is a good place to start if you want to find out.
 A book that must be read October 11, 2008
In the wake of this worldwide financial crisis, Financial Shock is a book that must be read. Mark Zandi gives a complete and detailed analysis of the subprime mortgage debacle. This book is well written, very informative, and is an interesting read. I intend to read this repeatedly to fully ingest it. In reading this, the lesson revealed is that balance is essential and greed is not good in the long run. Every aspect of the crisis is analyzed. Everything became too big. Unscrupulous lenders talked prospective buyers into getting more house than they needed and made it very easy for them to do so with lax background checks. Homebuilders bought into the act and built more homes than could be afforded. The bigger the market became, the more the rules were thrown out the window. Deregulation helped make this possible since no one could police what was going on. Even Alan Greenspan bought into it, obviously not learning from the stock market bubble that burst earlier in the decade. Sadly, the new homeowners suffered the consequences and eventually this would snowball into decimating the whole economy. Mr. Zandi also offers solutions so we don't repeat the same mistakes. In particular, his solution of offering money management classes in high schools is an excellent idea. All told, Financial Shock is an excellent read and I would highly recommend it.
Informative and approachable! October 9, 2008
1 out of 1 found this review helpful
I went into this book with a certain amount of trepidation -- I wanted to know about the subprime mortgage problem from the ground up, but I didn't have a lot of background knowledge going in, apart from listening to a few programs on the topic on NPR. However, I am *delighted* to say that this book was incredibly easy to read -- I didn't feel like Mark Zandi had dumbed down his subject for me, but rather that he took me step-by-step through the problems and compounding mistakes of the past ten years, using some really good historical examples, until I actually felt like I had a good understanding of what it all meant.
I think that the best thing that I took away from this book was understanding that I myself had a responsibility to increase my financial literacy, and to reduce my own risks. This was a great book, and I have already recommended it to several of my friends.
 A Little Early for a Retrospective October 8, 2008
Financial Shock provides a detailed and accurate history of the subprime mortgage crisis up through the point Bear Stearns was bought out by JP Morgan. The first 3/4 of the book was great; however, the author states that as Bear Stearns was bought out (mid-March 2008), the crisis hit an "apex." Zandi goes on to say the worst of the crisis was over by the time he wrote Financial Shock. Unfortunately, it's now clear that we have yet to see the worst.
I was mostly interested in this book for where Zandi thought various markets across the world would head as a result of the Financial Shock. The book only briefly covers what may unfold, and now has little relevant information regarding that, as this type of scenario was not even mentioned. Zandi does provide many intelligent steps to preventing this type of mortgage calamity and credit crunch from reoccurring. While it'd be great for lawmakers and bankers to take these to heart, they didn't interest me.
With a title like Financial Shock, Zandi could have reached out to take a look at the broader global market. Yet, the biggest misstep here was simply publishing this book before a proper retrospective could be produced. I also feel that Zandi should have discussed the credit ratings faulty assignments in depth, whereas he glazed over it. Surely being "Chief Economist and Cofounder of Moody's [...]" would give him the proper insight?
Too early, but a good explanation of how the sub-prime crisis developed October 7, 2008
1 out of 1 found this review helpful
Financial Shock is a look back at the things which put us in the market and economic situation we're in right now vis-a-vis the mortage and credit markets. Unlike the media, political voices, or the general public - most of which seems to be placing the blame almost exclusively on Wall Street and/or the Bush administration - the author, economist Mark Zandi (you may have seen him on CNBC and/or other business news outlets), does a good job of showing how a many different elements played their part. They include regulators at all levels, home builders, investors, home buyers, the Federal Reserve, the government, financial institutions, and others. To put it simply, the book does an excellent job of showing how large and complex an issue the development of the mortgage crisis really was.
Actually, Zandi does leave one group out of the discussion. It's the rating agencies, which have been reviled for their role in developments. While this means that a large cog in the machine is missing from examination, there's a reason why they were excluded. Zandi is in the employ of one of those agencies - Moody's. While it would have been a better text were the agencies included, it's hard to argue against the author taking on that subject. It was a no-win situation for him.
Breadth of coverage aside, I found the book very well written. It does an excellent job of explaining the many complex elements of the story, things like the array of alphabet soup derivative instruments and regulatory agencies involved. I have worked in the financial markets for a number of years, and have had a front and center seat for all of this, so I know from what I speak here. There are plenty of statistics and graphs for readers who get into the data, but I wouldn't call it a challenging quantitative read by any means. The subject Zandi tackles here is a big, heavily intertwined one and he did a very good job of showing how things all came together to create the so-called housing bubble and how it burst.
Here's where the book runs into trouble, though.
It was written too early. Things have not run their course and been resolved as yet. The author put the book together some time not too long after Bear Stearns was taken over by JP Morgan. As we all know, a great deal has happened since then. That means Zandi has only told part of the story.
He also basically made a prognostication in the book that the crisis was at an end. It's not going to help his credibility to readers that he obviously got that one wrong. Clearly, he and his publisher were trying to be the first to market with a book on the subject, but they're getting a bit burned by rushing it.
The other thing I think deminishes the over all value of the book is that in the end Zandi makes suggestions for things that could/should be done. In other words, he moves from history to policy advisor. I think he would have been better off just sticking with the history - at least in this particular product. He's presented an excellent discussion of how we got here. I have no problem with some commentary on how things could have been handled differently, but I'd rather see the forward looking stuff handled seperately.
Overall, however, I found Financial Shock a very worthwhile read, and would recommend it for anyone with an interest in the subject.
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