Zandi M. Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis

FT Press, 2008. - 288 Pages.If it’s growing like a weed, it’s probably a weed. So I was once told by the CEO of a major financial institution. He was talking about the credit card business in the mid-1990s, a time when lenders were mailing out new cards with abandon and cardholders were piling up huge debts. He was worried, and correctly so. Debt-swollen households were soon filing for bankruptcy at a record rate, contributing to the financial crisis that ultimately culminated in the collapse of megahedge
fund Long-Term Capital Management. The CEO’s bank didn’t survive.
A decade later the world was engulfed by an even more severe financial crisis. This time the weed was the subprime mortgage: a loan to someone with a less-than-perfect credit history. Financial crises are disconcerting events. At first they seem impenetrable, even as their damage undeniably grows and becomes increasingly widespread. Behind the confusion often lie esoteric and
complicated financial institutions and instruments: program-trading during the 1987 stock market crash; junk corporate bonds in the savings & loan debacle in the early 1990s; the Thai bast and Russian bonds in the late 1990s; and the technology-stock bust at the turn of the millennium.