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 $765,000.