And Then The Roof Fell In (James R. Hagerty)

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Collapsed House

Who killed the U.S. housing market?

Chain of Blame
By Paul Muolo and Mathew Padilla
(Wiley, 338 pages, $27.95)

Financial Shock
By Mark Zandi
(FT Press, 243 pages, $24.99)

Some finger former Federal Reserve Chairman Alan Greenspan, for cutting interest rates too low and believing that mortgage bankers could be trusted to make sensible loans. Others blame Angelo Mozilo, the recently retired CEO of Countrywide Financial, the nation's largest and most aggressive mortgage lender until it stumbled into the rescuing arms of Bank of America. Mr. Mozilo's espresso-roast tan, sharp suits and snarling voice make him Hollywood's obvious choice of villain.

{xtypo_quote_right} We then needed more Chinese-made stuff to fill those closets . . . {/xtypo_quote_right}

But no single person can carry the can for the housing bubble, its deflation and the current plague of foreclosures. That much is clear from two books – "Chain of Blame" by Paul Muolo and Mathew Padilla and "Financial Shock" by Mark Zandi – offering instant history on what may turn out to be the worst economic disaster of our time.

Messrs. Muolo and Padilla, financial journalists, say that Wall Street caused the mortgage-default crisis that spread to corporate debt, the stock market and even municipal bonds. Mr. Zandi, chief economist for Moody's Economy.com, indicts millions of perpetrators, including investment bankers, mortgage lenders, loan brokers, regulators, Chinese exporters, terrorists and the hordes of Americans who gambled that house prices would rise indefinitely.

Some degree of excess was probably inevitable. Once technology stocks collapsed in 2000, Mr. Greenspan's Fed cut interest rates to spur a slumping economy out of recession. That made it cheaper to buy houses just when Americans, disillusioned with stocks, saw real estate as a safer bet. The 9/11 terrorist attacks reinforced the notion that there was no place like home – especially if it was a trophy home with walk-in closets as big as what we used to call bedrooms.