Nusbaum on Ritholtz: A Review of 'Bailout Nation'

Includes: AIG, FMCC, FNMA
by: Roger Nusbaum

Well, I finally got around to reading Bailout Nation. If you want to save some time this morning then just go buy the book, read it and then plan on reading again in six months. If you want some color from me on why I think you should read the book, then keep reading this post.

As far the general tone of the book, remember you are reading what will be viewed as a reference piece of what happened, it reads very easily and very familiarly for anyone who usually reads Barry's blog.

One thing that struck me is how many moving parts there were to this and how they each had their seat at the table contributing to the blow-up. When was the last time you thought about SIVs? They were front-page important for a while there and now you probably go weeks without thinking about them. How much do remember about Indymac and what a huge player it was? How the hell could Fannie (FNM) and Freddie (FRE) blow up like that? Fannie and Freddie. Do you really know how insidious the entire AIG (NYSE:AIG) saga is?

I like that Barry goes out of his way to point readers to other references for more detail on quite a few subjects -- this contributes to the blog-like feel of the book. Barry chronicled most of this as it occurred, so it was easy to draw from that writing to cull the book together, point being that it captures what was happening at each step along the way instead of trying to piece it together with third party info.

Barry draws many conclusions and offers a lot in the way of possible solutions. I did not necessarily agree with every conclusion, however. For example, Barry does not think the Community Reinvestment Act played a role in the meltdown, and he thinks arguments that it did are misinformed. His argument is quite sound because as he says CRA didn't force banks to lend money to people who had no shot of paying it back. ,

I'm not going to out debate Barry on anything except maybe fire suppression tactics or Red Sox trivia, but with regard to the CRA argument I would wonder (and to be clear I do not know the answer, just asking the question) what sort of environment CRA contributed to creating, in terms of some sort of suasion that may have existed.

The question is subtle. I don't think was addressed in the book and could be a nonstarter, but there was a collective consciousness at play and it is possible that CRA contributed to it. I don't know the answer, but at one point in the book Barry talks about minorities generally getting hosed because of redlining and there have been many accounts of those folks getting hosed on mortgages. The two might be connected.

Page 232 lists who is most to blame, and number one on the list in Alan Greenspan, of whom Barry says "history will not be kind to the Maestro."

There is a nitty-gritty accounting of just about all the major players and institutions throughout the book, to the point of being funny and sad at the same time.

There is quite a bit of humor in the book - there were several instances where I literally laughed out loud. I'll close out the same way I started: Get the book and read it. You will know more about what happened than you do now.