Acknowledgments . . . viii
About the Author . . . ix
Introduction . . . 1
Chapter 1: Subprime Précis . . . 9
Chapter 2: Sizing Up Subprime . . . 33
Chapter 3: Everyone Should Own a Home . . . 49
Chapter 4: Chairman Greenspan Counts on Housing . . . 67
Chapter 5: Global Money Men Want a Piece . . . 81
Chapter 6: Bad Lenders Drive Out the Good . . . 97
Chapter 7: Financial Engineers and Their Creations . .
. 113
Chapter 8: Home Builders Run Aground . . . 131
Chapter 9: As the Regulatory Cycle Turns . . . 145
Chapter 10: Boom, Bubble, Bust, and Crash . . . 161
Chapter 11: Credit Crunch . . . 175
Chapter 12: Timid Policymakers Turn Bold . . . 193
Chapter 13: Economic Fallout . . . 233
Chapter 14: Back to the Future . . . 251
Endnotes . . . 273
Index . . . 285
The subprime crisis and the global financial panic it triggered will impact every one of us profoundly, for years, and perhaps even decades. What happened? And how can we prevent it from happening again? In Financial Shock, Revised and Expanded Edition, Dr. Mark Zandi answers these questions: thoroughly, carefully, and in plain English. This new edition has been systematically updated for the latest events, with insights into the dynamics of the worldwide Fall 2008 financial collapse, the freezing of credit markets, the extraordinary actions governments have taken in response, and the massive economic fallout. Zandi begins with a fast-paced "history" of the crisis: where it started, how it spread, and the damage it has caused. Next, he illuminates its deepest causes, ranging from the psychology of homeownership to Alan Greenspan's missteps, Internet technology to state-of-the-art financial engineering. After surveying the wreckage, Zandi previews the radically different financial system that is likely to emerge next, and offers more detailed and specific recommendations for policymakers and regulators. Along the way, readers will gain indispensable insights for protecting their own futures, managing their own investments, and navigating their organizations to safety.
Dr. Mark Zandi is chief economist and cofounder of Moody’s Economy.com, an independent subsidiary of Moody’s that provides economic research and consulting services to businesses, governments, and other institutions. His recent research has included studying determinants of mortgage foreclosure and personal bankruptcy; analyzing economic impacts of tax and government spending policies; and assessing policy responses to bubbles in asset markets. He has appeared on NBC’s Meet the Press, NBC News, CBS News, CNN, CNBC, and has served as an economic advisor to John McCain’s presidential campaign and the Obama administration. Zandi holds a Ph.D. from the University of Pennsylvania where he did research with Gerard Adams and Nobel Laureate Lawrence Klein.
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