Financial Shock: A 360 Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis | 
| Author: Mark Zandi
Publisher: FT Press
Category: Book
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Avg. Customer Rating:  47 reviews
Sales Rank: 1843
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 42 more reviews...
 Too early, but a good explanation of how the sub-prime crisis developed October 7, 2008
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.
 Understanding can save you during this economic crisis October 7, 2008
Financial Shock comes at a time when it is really relevant. If you don't understand what is happening in the financial markets or on Wall Street and Main Street and all over the world, this book explains, what happened, how it happened and what is going to happen.
A great overview and explanation of all things mentioned in the headlines that many may not understand. This book will help you during this tough economic crisis and help you to understand how it happened and what you can and should do to survive.
Timely topic for the current housing market October 6, 2008
This book outlines the historical information regarding the housing boom and fall. The uncovers the role key players played behind this crisis that the country is now dealing with. The writing style is clear and very understandable and the subject is truly compelling.
Every homeowner should read this book to understand the current state that this country must face. We should look at this book as a call for reform of our financial system.
Deserves close attention October 5, 2008
"Financial Shock" by Mark Zandi is a highly readable account of the subprime financial crisis. Refreshingly free of political or technical jargon, Mr. Zandi provides a straight-forward and highly accessible analysis of the multiple forces that have driven the world financial system to the brink. With information current as of the summer of 2008, this timely and comprehensive book offers many fascinating insights into markets, consumer behavior, regulators, the global financial system, and much more.
Mr. Zandi explains how the world's interconnectedness, which has been viewed by many as a way to mitigate investment risk, has in reality had the opposite effect. Mr. Zandi recalls that after 9/11, the desire to jump start the U.S. economy led to a decision by the Fed to lower interest rates, which made homes more affordable than ever before; but the U.S.' addiction to oil and cheap imported goods meant that dollars were flooding into foreign investor's hands in ever greater quantities. U.S. investment banks decided to exploit the opportunity by bundling mortgages into securities, fueling a circular dynamic that was led to its logical conclusion when unscrupulous lenders began to recklessly push loans onto increasingly uncreditworthy consumers, which of course culminated in an implosion of the system.
At the time of writing, Mr. Zandi believed that Bear Sterns' acquisition by J P Morgan in March of 2008 may have represented the apex of the crisis. Yet Mr. Zandi anticipated that corporate bond defaults tied to subprime mortgages and lack of transparency could lead to a deeper crisis in the credit markets, which has indeed occurred. Consequently, the author's recommendations on how to prevent a recurrence of this calamity deserves urgent and close attention from policymakers.
I highly recommend this book to readers who may be mystified by the workings of the market; to students of economics and history; and to those who may be interested in developing a more sane and just system of economics that serves the needs of working people, not just the greedy.
This made my blood boil... October 5, 2008
The number one thing I took away from this book is how banks, after pushing people into ARMs that were due to go way up in a few years with the reassurance that they could refinance before that happened, didn't bother to tell them that they'd have to pay hefty pre-payment penalties to do just that. It makes me wonder how many AUTO loans have been written with pre-payment penalties as well. (That's the next big collapse; you watch.) After reading this book, you'll be far less likely to buy the line that unworthy borrowers and deadbeats are what caused our financial meltdown.
For someone with not a great understanding of how financial markets work (like me), this book will be an eye-opener. I'm sure that the more times I re-read the book, the more the complexities of how the common people have been swindled will sink in. I know this: We can get mad at the way foreign investors are now insisting on being part of the taxpayer-funded bailout, but too many of them were lied to and manipulated just like we were.
It's done now: The bailout has passed both houses of Congress. I just hope that our next president will give the crooks hell. Heads should definitely roll, and you'll find the names of a lot of them in this book.
Finally, I have to say that this book did nothing to help me shake my very deep suspicion that the bum's rush into this "necessary bailout" is going to turn out to be akin to the last bum's rush that cost the American taxpayers so much: the "blank check" authorization to use military force the Congress gave George W. Bush. I emerged from reading this book with the conviction that We the People have GOT to stop thinking with our fear-driven reptilian brains, or we're going to be ripped off to the point that we cannot recover.
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