By Brian Summerfield, Online Editor, REALTOR® Magazine
Of all the books I’ve read that attempt to get at the central causes of the economic downturn, Matt Taibbi’s Griftopia (Spiegel & Grau, 2010) is the definitely the most vitriolic. It’s also the funniest, and the author’s humor and flair for language help push the reader through complicated, often depressing subject matter.
Interestingly, Taibbi draws many of the same conclusions about the financial meltdown of 2007-08 that Michael Lewis did in his book The Big Short — chiefly, that the system wasn’t brought to the brink by a few bad apples, but rather by extensive rot in the tree itself.
The main difference between his book and Lewis’ is that Taibbi covers a lot more ground. Whereas Lewis offers corresponding narratives of a handful of investors to explain why the financial system collapsed a few years ago, Taibbi focuses much more on the big picture, exploring complex business, political, and regulatory problems that have affected the U.S. economy for decades.
Taken together, these books can give anyone a comprehensible explanation of not just the recent financial crisis, but also how economic bubbles get inflated, then popped.
FROM THE BOOK: 5 LESSONS FOR REAL ESTATE
▪ Predatory lending is real: Although he generally doesn’t get into the impact of these macroeconomic issues on individuals, Taibbi does recount the interesting story of Eljon Williams. An African-American sheriff’s deputy from Dorchester, Mass., Williams owned a three-flat and rented out two stories. One day, he heard a “mortgage expert” on the radio talking about scams that targeted minority home buyers. Williams contacted this man, who then reviewed his mortgage and actually did find some irregular fees. Naturally, when Williams later sought to move up to a two-bedroom single-family home, he sought this individual’s help. However, despite Williams’ insistence on getting a fixed-rate loan, the man put him in an adjustable-rate mortgage. When Williams demanded an explanation after receiving a notice that his monthly payments were going up, the guy initially dodged inquiries, then disappeared. The reason Williams and so many other home buyers were put into ARMs, sometimes against their explicit wishes, was the fact that loan officers collected bigger fees on these loans than the standard, 30-year fixed mortgages. Continue reading »