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The Trillion Dollar Meltdown

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The Trillion Dollar Meltdown

Easy Money, High Rollers, and the Great Credit Crash

Public Affairs,

15 min read
10 take-aways
Audio & text

What's inside?

Understanding the subprime mortgage crisis isn’t easy, but this is about as clear an explanation as you’re going to get.

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Editorial Rating

9

Qualities

  • Innovative

Recommendation

In this excellent, highly readable book, Charles R. Morris combines legal and financial experience with literary craft. No ideologue, no partisan and certainly no salesman, Morris traces the roots of the 2007-2008 mortgage securities crisis to its distant origins in the 1970s. He argues that policy missteps under the Nixon, Ford and Carter administrations, when Arthur Burns chaired the Federal Reserve, led to dollar debasement. He contends that the decline of America’s currency and its business sector at that time led in turn to the Reagan administration’s zeal for deregulation and Chicago-school economics. He details his belief that Alan Greenspan’s policies took America from a relatively healthy financial status to a position perhaps as dire as in the late 1970s. Morris also reveals the privileges enjoyed by an out-of-control financial services system. getAbstract found this to be a trenchant and provocative read.

Summary

Two Roads and a Choice

In June 2007, two Bear Stearns hedge funds ran into trouble after a downgrade. The firm had to pay billions to assume the hedge funds’ mortgage-backed securities holdings. Shortly, the contagion spread as banks worldwide took hefty write-offs. Central banks in North America and Europe opened the money spigot, to little avail. Even experts seemed to have no way of predicting how far the value of complex, mortgage-backed securities could fall – and how much damage their collapse would cause throughout the financial system. History marked out two roads and gave policy makers a choice. Then-Federal Reserve Chairman Paul Volcker took the first road in the late 1970s and early 1980s when he courageously, forthrightly grappled with the challenge of wringing inflation out of the U.S. economy. He restored confidence in America’s financial institutions. Japan took the second road after the collapse of its 1980s bubble. Japan did not admit its problems or deal with them straightforwardly. Instead, it concealed the problems, avoided responsibility and failed to take its medicine. As a result, Japan’s financial sickness lingered for a long time. Indeed, its financial...

About the Author

Charles R. Morris, a lawyer and former banker, has published articles in numerous publications and has written 10 books.

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