With Oprah signing off this afternoon,
perhaps it is time that this blog replaces her immensely popular book
club. I just finished reading "The Big Short," written by Michael Lewis (author of many notable books including "Liar's Poker"
about his time as a bond trader in the 1980s). It essentially tells
the story of the handful of individuals who saw the problems in the
mortgage markets -- from lending to individuals who could never afford
to pay back their loans through the securitization of both the mortgages
and the credit default swaps insuring those mortgages -- and made
millions as a result. I was worried that it would be a
self-aggrandizing story about a bunch of financial geniuses who profited
while the markets crumbled, but it tells a much more complicated and
nuanced tale from an interesting perspective. I would recommend it to
anyone interested in the collapse of the mortgage markets and the crisis
that followed. (I am just starting on "Too Big To Fail" and would welcome any other recommendations since I can't get enough of this topic.)
If you don't have time to read this or
any other book on the subject, but remain interested in the back story
on the financial crisis from which we are slowly (and hopefully)
emerging, I would recommend the interactive and easy to follow version
found on the Marketplace website -- "Anatomy Of The Housing Crisis."
It takes you through every step of the process in connection with one
property in Los Angeles: from the original owners who bought it for
$445,000 and sold it for more than $1 million four years later (remember
those days); to the exotic mortgage those buyers obtained in order to
purchase the property; to the securitization of the loan through which
the lender passed on the risk to investors; through to the inevitable
foreclosure and purchase out of foreclosure by the current owners for
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