Sunday, August 30, 2009
Life Inside the Great Mortgage Meltdown
By Edmund L. Andrews
Norton. 220 pp. $25.95
How Real Estate Came to Own Us
By Alyssa Katz
278 pp. $26
Spurred by their own tales of woe, Edmund L. Andrews and Alyssa Katz have created separate, vivid portraits of America besieged by rampant real estate speculation and the resulting housing collapse.
Andrews, an economics reporter at the New York Times, tells a confessional tale about how he signed away his life for a toxic loan to buy a house in Silver Spring that he couldn't really afford. His tone is bizarrely bright and breezy, given the wretched outcome that is evident from the start. The book's title, "Busted," gives away the ending: Andrews's home was in foreclosure, he was contemplating bankruptcy, and his marriage was in tatters.
Andrews's downward spiral started with a midlife crisis. He got divorced and married a woman he had known in high school, with whom he bought a house. He couldn't face the reality that his new family's reduced income, trimmed by alimony and child-support payments, meant that he had fallen out of the economic elite and into the ranks of the working poor.
Andrews found himself in the same predicament as millions of middle-income people who bought homes they could not afford. Meanwhile, he was covering the brewing financial crisis, caused by lenders who aggressively promoted new kinds of loans: Starting out at deceptively low rates, the loans later climbed beyond reach or left borrowers with mortgages higher than the value of the homes.
Andrews discovered his compassion for borrowers who fell into the vicious mortgage trap only when it happened to him. Until then, he accepted the self-serving rationale of the financial mavens and Bush-era government regulators who told him these predatory loans made sense, at least for some people. Readers of the New York Times would have benefited from more persistent, hard-hitting coverage of the growing risk. But it was a time of willful self-delusion, both ideological and personal, on the part of consumers and regulators alike. Andrews characterizes former Federal Reserve chairman Alan Greenspan as being equally callow, turning a deaf ear to community groups that warned of potentially devastating consequences if regulators did not intervene more aggressively. "The Fed chairman was hardly alone," Andrews writes. "Almost all the top bank regulators in the Bush Administration vociferously praised 'financial innovation' and sought to make life easy for the institutions they supervised."
Instead, the regulators whistled away the problem, avoiding those people they adversely affected. When Andrews told Greenspan that he himself had acquired a toxic loan, Greenspan "blanched" and then "looked appalled. . . . I might have been the only person he had known personally who had been caught in the mortgage meltdown."
Alyssa Katz suffered her own travails. She was displaced from her rental apartment in New York City when the property's owners turned it into overpriced condominiums. To her, the experience illustrates the obsession with home ownership as a feature of the American dream. In her view, real estate speculation has added to the woes of the middle class, making it increasingly difficult for those of average income to make economic progress.
A journalism professor at New York University, Katz examines the mortgage meltdown in a series of richly reported chapters based on articles she wrote for Mother Jones magazine and the New York publication City Limits. Her reporting was prescient. One chapter, "Into Oblivion," describes how subprime mortgages devastated middle-class neighborhoods in Cleveland; another, "Reaching The Limits," captures the reckless pace of homebuilding in Sacramento; "Crime Spree" documents widespread loan fraud even in affluent communities such as the Atlanta suburbs.
Katz and Andrews are talented, insightful reporters, and their books advance our understanding of the mortgage meltdown. But a thoughtful reader can't avoid reflecting that it might have been better if Katz had been the economics reporter, hammering home the encroaching danger in article after article, and Andrews had been the one teaching journalism.
Kirstin Downey, a former staff writer at The Washington Post, is the author of "The Woman Behind the New Deal: The Life of Frances Perkins, FDR's Secretary of Labor and His Moral Conscience."