Many accounts of the nation's economic problems go overboardeither on the wonkish policy analysis at one end or theheartstring-tugging anecdotes on the other. It is rare to find awriter who strikes the necessary delicate balance.
Peter S. Goodman, author of Past Due: The End of Easy Money and theRenewal of the American Economy, has done just that and produced athought-provoking and eminently readable book.
Goodman, a national economics reporter for The New York Times,spends most of his time on the big picture. He explains complicatedsubjects such as credit default swaps and derivatives and thendescribes how they travel through the economic system and impactindividual consumers.
The book points fingers at both political parties for not onlyfailing to prevent the economic crisis but for supporting policiesthat made things worse.
The Clinton administration's efforts to encourage homeownershippushed some people into homes they couldn't afford, and its supportfor legislation tearing down the walls between commercial andinvestment banks allowed banks to engage in practices that wreakedhavoc on the financial system.
Republicans expanded homeownership efforts (President George W.Bush pushed the “ownership society”) and escalatedderegulation.
Also, former Federal Reserve Chairman Alan Greenspan, who servedfrom the Reagan administration through the beginning of George W.Bush's second term had an almost blind faith in the free market andwas loathe to support any regulation that interfered with it.
Goodman contends that the nation's prosperity during much of thisperiod-fueled first by the technology boom of the 1990s and thenhousing bubble of the early to middle part of this decade-was a“lucrative exercise in collective delusion.” He likened the economyto Neverland, as depicted in the classic children's tale PeterPan.
“Americans have operated as if we can fly, borrowing increasinglyenormous sums of money while making believe it need never be paidback, while Wall Street has cavorted across an island of unlimitedadventure with no adult supervision,” he writes.
Goodman doesn't break a great deal of new ground, but heeffectively synthesizes a great deal of complicated information. Hepresents his reportage and analysis in chapters that are longenough to provide detail and context yet not so extensive that thereader gets bored.
He draws on his own experience as a foreign correspondent in Chinato explain the workings of the Chinese economy and the mindset ofthat country's business and political leaders. Those subjects areused as a springboard for discussing the implications of the risein foreign investment and the growth in foreign countries buyingAmerican debt.
Readers who monitor the housing market will find his discussion ofthe real estate bubble, during which time many consumers turnedtheir homes into an ATM, to be especially enlightening.
On a micro level, Goodman tells the story of Willie Gonzalez whomoved several times to find work and was laid off several timesbecause of the economy. Eventually, he landed in Florida and boughta home as a result of readily available financing. He put 2% downand used credit cards to buy furniture. He lost jobs and had hissalary cut at others and, in the end, couldn't afford the mortgagepayments so he lost the house.
While the reader may empathizes with Gonzalez, Goodman is carefulnot to portray him as an innocent victim of circumstance anddocuments the poor decisions that Gonzalez made that helped get himinto his predicament.
On a macro level, Goodman describes the efforts of some of theworst companies-Washington Mutual and Countrywide-to push riskyproducts and to prey on consumers who weren't always financiallysavvy.
Combine dubious business practices with government policies thatprovided incentives for home ownership but didn't adequatelyregulate how those policies were implemented and the result is aneconomic tsunami.
While Goodman points fingers at those on both sides of thepolitical divide, he's a bit harder on Republicans and omitscertain events from his discussion that might have presented a morecomplete picture.
For example, he doesn't touch on the Democrats' opposition toefforts by congressional Republicans to place greater restrictionson the activities of the Federal Housing Administration, Fannie Maeand Freddie Mac. Also, he doesn't discuss how some otherwell-intended legislation, such as the Community Reinvestment Act,caused banks to make some risky investment decisions.
While much of the book is depressing, Goodman ends on a positivenote with two chapters on how biotechnology and green energy havehelped transform once dying manufacturing areas.
Readers looking to learn about how the United States got into itseconomic mess and how that impacted the lives of real people willfind reading Past Due: The End of Easy Money and the Renewal of theAmerican Economy to be an enlightening and engagingexperience.
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