FHA Book

Before the Bust

New York Magazine presents a detailed history of how the subrpime boom got us to where we are today. It’s an almost poetic, information-packed read. And that’s just the first page! A snippet:

Where did the money come from? Banks lent it, mortgage brokers lent it, and even home builders themselves got into the act. The housing markets were so hot the lenders barely had time to check if their buyers were deadbeats, cheats, speculators, or actual honest-to-Betsy hardworking people who wanted nothing more than what Tom Joad wanted 70 years ago. Oh, and the buyers didn’t have time to check out the terms, either; the value of the houses was going up too fast. Gotta close now! Nor did the regulators tap the brakes—whoops, there were no regulators. If something went wrong, who cares? The buyers could always sell their ever-appreciating home to the next guy on the reservation list or the ten after him. The builders, brokers, and bankers then shipped these mortgages east to the big Wall Street firms, which bundled them together and merchandised them as high-yielding bonds often backed up by nothing more than the full faith and credit of, well, no one.

The article goes on to look at the nationwide implications of the bust by explaining that this crisis goes way beyond home foreclosures and into the over pricing of bonds on the market. The author, James J. Cramer, does a great job pulling apart all of the complexities and laying them about one by one, and the picture isn’t pretty.

At the end of the day it’s recklessness abound. Although no one will accept it, everyone’s to blame.