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Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis. Paul Muolo and Mathew Padilla. 2008, 308 pages, Hoboken, New Jersey: John Wiley & Sons, Inc.
As far as books about the subprime crisis and its aftermath go, this was an early one. Paul Muolo was also a co-author of a book that documented the savings and loan crisis of the 1980s called Inside Job: The Looting of America's Savings and Loans. All co-authors of both books are journalists whose full-time jobs involved reporting on American business. When Chain of Blame was written, the housing market had crashed and the stock market was headed steeply south. The commercial real estate market was yet to tank.
Journalists, naturally, like to talk about the people responsible for the news and to paint pictures of what led up to current events. This book does that superbly. Their basic economic understanding of events is good too. The two characters that feature most prominently are Angelo Mozilo and Roland Arnall. These two are the founders and CEOs of Countrywide Financial and Ameriquest Mortgage, respectively. Those two were the non-bank financial companies primarily responsible for originating subprime residential mortgages that were sold to investment banks like Bear Stearns, Merrill Lynch, and Lehman Brothers, for production into mortgage-backed securities and then sale to investors.
Other characters play secondary roles, such as Alan Greenspan, former Federal Reserve chairman, Henry Paulson, Treasury secretary in the Bush administration, and Ralph Cioffi, founder and senior portfolio manager of Bear Stearns' two subprime hedge funds. Cioffi along with Matthew Tannin were indicted by federal authorities and their trial is set to begin in Brooklyn in September 2009. Other characters join the story to fill in gaps and to explain the connections between the players.
I like this book because it dramatizes what Paul Krugman says was the "core of what happened," mainly the run on the shadow banking system. The bubble aspect of these events, things that Robert Shiller talks about in his book The Subprime Solution: How Today's Global Financial Crisis Happened and What To Do About It, are not emphasized in this book.
Organization, Readability, and Themes
The complete histories of both Angelo Mozilo and Roland Arnall are set out in the pages...