Book Review: Financial Shock

Note to readers: for this review, I read the first chapter, and skimmed the rest of the book. (full disclosure)  I usually read the entirety of every book I review, but I did not this time.  Why?  Chapter 1 is the backbone of the book, and tells the whole story in a nutshell.  The remaining chapters flesh out Chapter 1.  Most of my writings over the past five years shadow what Mr. Zandi has written, and he has created an integrated description that covers every major area of the crisis, with particular attention to mortgages, and the huge effect that the speculative mania in real estate had on the financial economy.

This is a serious book, one that explains the roots of our crisis.  If you haven’t understood it in a systematic way from reading my blog, or those that I recommend, this book will give you a coherent explanation of how we got here.

I do have some quibbles with the book.  When he describes residential mortgage securitization on page 117, the mezzanine and subordinated tranches are too large, even for subprime.  Also, his recommendations in the last chapter — I can agree with most of them, but not with mark-to-market, and the uptick rule.

This edition of the book takes us up to the first quarter of 2009, allowing Zandi to comment on the initial actions of the Obama administration.

All in all a very good book.  If you have a relative that doesn’t understand the crisis, this will explain it to him in a simple way.  If you want to buy it, you can buy it here:

Financial Shock (Updated Edition), (Paperback): Global Panic and Government Bailouts–How We Got Here and What Must Be Done to Fix It

As with all of my reviews, if you buy something through Amazon after entering through my site, I get a small commission, and you don’t pay anything more.  Don’t buy anything that you don’t want to buy on my account, though.