Busted: Life Inside the Great Mortgage Meltdown
Edmund Andrews, economics reporter for The New York Times, joins us at TPMCafe Book Club this week to discuss his book Busted: Life Inside the Great Mortgage Meltdown.
From Ed's introductory post:
Although the narrative is anchored on my own personal experience, the goal is to explore in intimate detail the broader corruption and cynical recklessness that infected players at each level of the financial food chain. Two-thirds of the book is not about me but about the people who helped deliver all that money to my door: my lenders, the Wall Street guys behind them and the Washington policymakers like Alan Greenspan.
Joining the discussion are Dean Baker, Cafe regular, of the Center for Economic and Policy Research; Justin Fox, TIME's economics and business reporter and author of The Myth of the Rational Market; Daniel Gross, senior editor at Newsweek and author of Dumb Money: How our Greatest Financial Minds Bankrupted the Nation; Daniel McGinn, national correspondent for Newsweek and author of House Lust: America's Obsession With Our Homes; and Nathan Newman, Policy Director for the Progressive Legislative Action Network.
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A prime example of the "Greater Fool Theory."
This book is a brutal description of an exceptionally well informed, professional, financial journalist spiraling into the debt abyss. From his unique perch at the Times, he could see what was happening but chose to double down on the housing bubble like the craps gambler shouting out "Baby needs new shoes!"
Not to be missed is the Maestro's (A. Greenspan) reaction when Edmund confessed...
There were many players in this latest Bubble. In January 2008 Janszen, in an Atlantic cover article, stated the only thing worse than the rise of a new bubble would be its absence.
Looks like we didn't get one in time.
BTW, the Kindle is great. Got the book that way and just subscribed to the Times. Very cool.
June 22, 2009 4:32 PM | Reply | Permalink
I haven't read this book yet but according to your comment it's great. I would like to read it as soon as possible and I hope I would manage to do this. I love books which are based on personal experience. It's a kind of biography and it's very exiting. The author is not afraid of sharing his personal life and it's really amazing! I wouldn't be able to do so. I'm afraid even of applying to payday lenders through the internet.
September 15, 2010 5:49 AM | Reply | Permalink
Busted Author Busted
People should know that the author did not give the full story of the source of his problems. See Amazon reviews for some discussion, and particularly read Megan McArdle's blog on The Atlantic website, starting with her posts May 15 and May 18 (especially).
http://meganmcardle.theatlantic.com/archives/2009/05/
Unfortunately, this guy's narrative, that the bad and greedy Wall Streeters suckered him into buying too big of a house, tells only half the story. The other half is that his new wife couldn't control her spending.
I haven't read the book myself, but having read McArdle's review, I felt the author had a bit of a credibility problem, and I was less inclined to read it.
-- ARG
June 22, 2009 4:51 PM | Reply | Permalink
Beforing buying the book I read McArdle's review blasting Edmund for not revealing his new wife's financial past (serial bankruptcies). While it might have provided more background into Edmund's motivations, the fact is Edmund doesn't say he was suckered into loans he couldn't afford. He knew exactly what he was doing and marveled that he was allowed to do it. He was gambling that housing prices would keep increasing and he could refi as required and that was exactly what everyone else was doing. He was gambling. He knew it. And so did the Wall Street enablers.
He lost. So did America.
June 22, 2009 5:04 PM | Reply | Permalink
I will read with interest the comments of the guest reviewers this week. I just start with a bit of a slant against the author, since it seems he wasn't really telling the whole story in his book -- or perhaps in the marketing of his book.
-- ARG
June 22, 2009 5:16 PM | Reply | Permalink
I'm sorry, I should have said especially the May 21 entry at the link above:
-- ARG
June 22, 2009 5:07 PM | Reply | Permalink
I think I take issue with "serial" being used to describe something that happened twice, particularly when bankruptcy is the issue: you can only file for bankruptcy once every 7 years, right? Or maybe it's 8? It's the better half of a decade for sure. Circumstances can change a lot in that kind of time frame.
June 22, 2009 5:48 PM | Reply | Permalink
I don't have any problem with the phrase "serial bankruptcies," I just don't think it would add much to the book to have included that. The interesting story is that of someone professionally aware of the housing bubble and still signing on to debt he could not rationally afford. That is, unless the proverbial "Greater Fool" came to save the day.
The systematic wishful thinking that allowed this is the bigger problem. From AIG to investment bankers and rating agencies who branded some of the securitized debt triple A, the risk was simply ignored and the ones that brought it up were marginalized. Explaining this from his up close and personal POV is the book's strength and uniqueness.
June 23, 2009 12:01 AM | Reply | Permalink
Hi ARG,
Certainly people should know - and Ed addresses this directly in his first post, which is now up. We've also invited Megan to participate in the discussion, which she may do later this week, pending her very busy work schedule.
June 22, 2009 5:08 PM | Reply | Permalink
You call this "spot on?":
"Foreclosures appear to be one of the few things in America not tracked directly by race. But the circumstantial evidence that blacks and Hispanics account for a disproportionate share is agreed upon by all who have looked into the question closely.
This map from RealtyTrac shows that the foreclosure disaster is largely regional. There are high rates of foreclosure in states such as Georgia and New Jersey, but the two main default dumps are the Midwestern Rustbelt and the heavily Hispanic Sunbelt.
The first regional meltdown is centered in Detroit, where the auto industry is perpetually dwindling. It's hitting black neighborhoods particularly hard."
So, Sailer's "analysis" is that blacks losing their jobs in Detroit due to the collapse of the auto industry, overbuilding in the "heavily Hispanic" Sunbelt, and global economic near-collapse, is all to blame on a $550M minority outreach program. Well, Stevie does have his circumstantial evidence, and his Google.
It's amazing what people will believe when it comfortably reaffirms their prejudices.
June 23, 2009 12:04 AM | Reply | Permalink
This was supposed to be in response to Ellen's endorsement of the execrable Steve Sailer and his "spot on" analysis.
June 23, 2009 10:33 PM | Reply | Permalink
Versha,
Ed never addresses this honestly, I am surprised that you would muckrake for page views. McArdle has posted her opinion and it should stand on its own, she gave him ample opportunity to respond to her and all he does is duck and look for another outlet to post his self serving explications. They are dishonest and he's only trying to flog his book sales.
-BS.
Cross posted from his simpering article:
I disagree, your book (and NYTM excerpt) do not detail the trials and tribulations of a "typical" subprime borrower.
You describe people who thought they deserved more than they earned. If you felt your child support and alimony payments were so "onerous", why did you agree to them? Was it because you couldn't get out of your marriage fast enough to think straight? How awful for your children to read, someday, about how much you bitched about having to pay that amount for their support.
How awful to know that at the time you pitched your book and sold it for a six figure advance, you agreed that your wife should file for bankruptcy under her name alone, based on her lack of an income, until a creditor forced her to include your income. How laughable her representations of "value" for her assets. Seriously, you bought her a $500 wedding ring? Really?
How many mutual bills (prior to your marriage) were crammed into that 2007 bankruptcy? And, really, was there was no other recourse to repaying her sister than to file bankruptcy so that her sister received nothing in settlement?
I not only question you on moral grounds, but on ethical grounds as well.
The only way in which your situation resembles a "typical" subprime borrower is in the minority of cases who feels entitled to more than their income alllows.
I do know of a few people who got caught up in subprime hell by being unsophisticated borrowers who crashed because the economy killed their jobs and ability to pay their mortgages and other bills. I've been in their homes during the Christmas Holidays when their children got nearly nothing because there was no money and the parents didn't want to take on any more debt, but you and your blended family do not fit that model.
You are far more like the cheats who lived beyond their means for years banking on home appreciation until the bubble popped. I read your NYTM excerpt and all I felt was disgust and a need to slap you both into adulthood. You have seven children depending on you and you acted as though you were uneducated fools with double digit IQ's.
"I was in love" equates to a self involved mid-life crisis without considering your children or current spouses well-being. It's navel gazing at it's worst and now you hope that you can flog this book long enough, with the help of your media friends, to make enough money to continue the charade for a few more years.
It's beyond time to sit down and take a good hard honest look into the mirror and confront what you see there.
Don't dismiss or trivialize the bankruptcies or the constant overspending (how is it possible you're $50k in credit card debt AGAIN, two years after your wife discharged $26K in miscellaneous debt and approximately 2-3 years after you refinanced and took out enough money to pay off the rest of your credit card debt?)
Please do not blame "everyone" for this crisis, there's a big reason why you have been so heavily critisized. So far, it's a minority of mortgage holders who have defaulted. There's a whole real world out there of renters who pay their bills and mortgage holders who pay their mortgage and don't run up their credit cards to cover living expenses. They cut back on expenses when their income doesn't cover current spending, but I guess you don't know about that and just hope you can sell this fabrication of honesty to dig yourself out of the hole you put yourself into.
June 22, 2009 7:45 PM | Reply | Permalink
In addition to addressing McArdle head on instead of weaseling it through his media friends, I'd love to read a full blown honest take on these two articles:
http://delong.typepad.com/sdj/2009/05/new-york-times-crashed-and-burned-and-smoking-watch-ombudsman-clark-hoyt-edition.html
http://www.realclearmarkets.com/articles/2009/05/capitalism_and_the_cheating_et.html
Yeah, I know, not gonna happen.
June 22, 2009 7:51 PM | Reply | Permalink
Ok, folks. Here's the deal about the my wife's bankruptcies.
But first, I have to say that anyone who thinks I've glossed over the hard truth either hasn't read the book or isn't thinking straight.
As I've said before, the first bankruptcy was all the way back in 1998, when the IRS came after her then-husband, who hadn't paid his taxes in years. He'd actually have her sign the returns, but never filed them.
It was horrific, but what did it tell us about Patty, who was a stay-at-home mom and not earning any money at the time? More to the point, what did it tell us about our mortgage woes in 2009?
The second case was in 2007, but it was prompted entirely by debts Patty ran up in 2003 and 2004, when she was a single mom with four kids whose ex-husband (the aforementioned tax-challenged one) was a deadbeat dad.
Patty's problems weren't about wild spending. They were about poverty -- suddenly trying to support four kids while working for $10 an hour after having been a stay-at-home mom for 20 years.
I could have written a whole chapter on the deadbeat dad, who continues to defy one court order after another on child support.
But neither the bankruptcies nor the child support had any bearing on our mortgage problems.
What really did seal our fates -- and what I DO write about in detail -- was that Patty got fired from a well-paying job in 2006 and never came close to replacing that lost income.
Being fired was infinitely more agonizing and mortifying -- and relevant to our story -- than the problems caused by a deadbeat ex-husband.
All of this is somewhat besides the point. The whole book is based on a bad decision and an insane mortgage. I don't blame anybody else for our problems.
Those are the easy questions. The hard question is, why was it even possible?
June 22, 2009 8:01 PM | Reply | Permalink
Why are you answering this guy? He's posted the same drivel in two places already and he's just going to hound you and attempt to derail the discussion.
You're going to get some hard criticisms from readers here and I urge you to engage smart people like ARG Chicago and others, but to ignore people who use obscenities as TPM handles.
Oh and also I am very angry at Amitai Etzioni for some reason and am not to be taken seriously on the subject of him. :) And the guy who is a chicken around here is very nice.
June 22, 2009 8:10 PM | Reply | Permalink
I am a hen.
Geez.
And I am not nice at all, but my lil chicken heart bleeds for Mr. Andrews. I know folks that have gone through some of what I have read about him, but not all at the same time!
Ack!
I will scrape up some chicken scratch and buy his book and rec it to my friends, not because I am nice, but because we gots to take care of our own.
Why could that happen, indeed?
June 22, 2009 8:27 PM | Reply | Permalink
Thanks for the kind words, destor.
Here's my main problem with this whole unfortunate situation:
I believe that Wall Street and greedy mortgage brokers, et al, are the people primarily responsible for the recent financial crisis and the sub-prime mortgage component of it.
But there is a meme out there (on the conservative side -- you know, the Daddy party) that the real fault lies primarily with the borrowers, who were at best irresponsible and at worst scam artists trying to rip off the banks (according to them).
So here comes a book with a perspective that would support my view that the incredible lack of standards and due diligence by the lenders are at the core of the problem.
It's just such a disapointment that the author of this book can be credibly attacked about whether he told the whole story, and whether he and his second wife aren't, in fact, the kind of irresponsible borderline scam artist types the defenders of Wall Street would have us believe truly caused this whole mess.
I just feel like it undermines the whole premise of the book. But, as I said, I haven't read it yet, and may still do so.
-- ARG
June 23, 2009 6:27 PM | Reply | Permalink
Dear Bullsh't,
You seem very bold in your accusations. Why do you post anonomyously, and with such a curious nickname?
June 22, 2009 8:09 PM | Reply | Permalink
Maybe it's McAddled, er Ardle.
I dunno. Not a fan, she's on Marketplace pretty regularly. Brad DeLong isn't a fan, either.
June 22, 2009 10:45 PM | Reply | Permalink
Because you're full of it? Otherwise, I dunno.
Did you not marry the woman "for better or worse"? Uh huh, well worse involved debts that appear to have stemmed from her relationship with you, and while with you, and yet you seemed to be absolutely complacent about discharging them via bankruptcy while you were in the process of earning a substantial book advance in addition to your six figure salary?
My disdain stems from the fact that I, and other family members, have faced similar situations and found a way to honor our obligations while you seem to enjoy placing the blame on your creditors, and your wife's ex-husband. Sure, we probably could have done the same thing you're doing, but we all found ways to pay the debts we owed, after all, we were in possesion of the goods and benefits we charged so we felt obligaged to repay those debts. Obviously, you feel differently. Is it wrong for me to feel that you've taken a cowardly (my opinion only) way out of your problems?
If your current wife was a stay at home mom without income in 1998 (and 10 years prior to that filing) how was she a responsible party to the 1998 bankruptcy? Shouldn't she have been able to avoid that by asserting that she was an "innocent spouse"? Unless, of course, they used the bankruptcy to discharge debts solely in her name...
While I thank you for your reply to my original post, I fully expect that you will avoid addressing any substantive questions I asked again.
Are you looking to sue me, Mr. Andrews? I just have to ask for clarity's sake. I can only assure you that I have nothing you value to take away from me.
You've put yourself and your families into the public spotlight and seem to be attempting to profit from your financial mistakes, everything else is a matter of public record which would have never come to light had you not written and endlessly flogged your book wherever you can find an outlet to publicize it.
Rather than rail against your critics you should heed at least some of the comments they are making, instead of debating them on the internet.
You should take a good hard look at the devastation you have created.
June 22, 2009 11:48 PM | Reply | Permalink
You should take a good hard look at the devastation you have created.
You seem to be confusing the pusher with the addict.
June 23, 2009 12:33 AM | Reply | Permalink
That's no excuse and no reason to lionize the addict.
June 23, 2009 12:38 AM | Reply | Permalink
No, it's not. It's also no excuse to demonize the addict. Hell, it's not even fair to the pushers. At least pushers, like casinos, have a working business model.
June 23, 2009 12:47 AM | Reply | Permalink
No, but it may be time to stage an intervention for the addict rather than continue to enable him by excusing his part of the debacle.
June 23, 2009 1:05 AM | Reply | Permalink
Plus, I would truly like to read his direct dialogue with his smarter critics. I.E. Megan McArdle, Brad Delong, Felix Salmon, and Steven Malanga.
But this will never happen and it really should if we are to have any intelligent discussions on his dilemma.
Without Mr. Andrews addressing his critics directly we are just highly evolved Plains Apes flinging poo at each other, and I'd much rather read Mr. Andrews engaging in an honest dialogue with his informed critics. Which we have yet to see happen.
June 23, 2009 1:11 AM | Reply | Permalink
I do think it a shame that Steve Sailer -- TPM's favorite libertarian racist -- wasn't asked to participate.
His identification of Bush and Rove as the godfathers* of the subprime scandal, the result of their attempt to woo the Hispanic vote via irresponsibly easing the terms of government-backed mortgages to minorities (lenders systematically targeted hispanics -- Edmund Andrews), is almost if not completely spot on.
Note: Sailer's criticism is not a simplistic attack on the Community Reinvestment Act but rather an analysis of how Bush and Rove used it to promote their schemes (think Angelo Mozilo).
* This orchestrated push for more minority homeownership wasn't some random caprice of the President. It was part of the master plan of his political Svengali, Karl Rove. 9/28/2008
June 22, 2009 9:57 PM | Reply | Permalink
Interesting. Just last week my Hispanic housekeeper, who comes in with a crew 1 hr a week, was telling of her woes. She had bought her first house 2 years ago for 500k with no down. She has lost business because of the economy, and has found her house is now worth less than half that. They can't re-finance and now can't pay the 3k/mo. I remember when she told me her husband and her bought the house. It was right after she earned her citizenship. I had tried to hide my fear....
I've given her a raise but one can only do so much.
June 23, 2009 12:43 AM | Reply | Permalink
Quote"The hard question is, why was it even possible?"
No, the hard question is: Why would you ever take the money?
Financially conservative, even uneducated financial conservatives, would have never taken the money.
The second hard question is: Why would you take the money knowing you could never pay it back?
June 22, 2009 11:53 PM | Reply | Permalink
wow.
talk about bullshit.
June 23, 2009 1:10 AM | Reply | Permalink
Once again, I will ask you to address the articles written by Brad Delong and Steve Malanga.
Your thoughtful response is breathlessly awaited on my part.
June 22, 2009 11:57 PM | Reply | Permalink
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April 5, 2010 11:28 AM | Reply | Permalink
I didn't read this book, but after I looked over some reviews I would definitely buy it. A friend of mine, who is an Austin real estate agent believe that this book is one of the best presentation of Americans lured into easy credits, bankruptcy and house bubbling.
February 2, 2011 8:13 AM | Reply | Permalink
I once had a mortgage on my house and I've got to tell you that I was lucky I had heard about the reverse mortgage calculator, because I realized just what Edmund Andrews has: that the whole system looks very much like the cycle of nature, in which the strongest wins.
February 2, 2011 2:12 PM | Reply | Permalink
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