New Book Combines Pathos and Analysis of Easy Credit Run Amok

Many accounts of the nation’s economic problems go overboard either on the wonkish policy analysis at one end or the heartstring-tugging anecdotes on the other. It is rare to find a writer who strikes the necessary delicate balance.Peter S. Goodman, author of Past Due: The End of Easy Money and the Renewal of the American Economy, has done just that and produced a thought-provoking and eminently readable book.Goodman, a national economics reporter for The New York Times, spends most of his time on the big picture. He explains complicated subjects such as credit default swaps and derivatives and then describes how they travel through the economic system and impact individual consumers.The book points fingers at both political parties for not only failing to prevent the economic crisis but for supporting policies that made things worse.The Clinton administration’s efforts to encourage homeownership pushed some people into homes they couldn’t afford, and its support for legislation tearing down the walls between commercial and investment banks allowed banks to engage in practices that wreaked havoc on the financial system.Republicans expanded homeownership efforts (President George W. Bush pushed the “ownership society”) and escalated deregulation.Also, former Federal Reserve Chairman Alan Greenspan, who served from the Reagan administration through the beginning of George W. Bush’s second term had an almost blind faith in the free market and was loathe to support any regulation that interfered with it.Goodman contends that the nation’s prosperity during much of this period-fueled first by the technology boom of the 1990s and then housing bubble of the early to middle part of this decade-was a “lucrative exercise in collective delusion.” He likened the economy to Neverland, as depicted in the classic children’s tale Peter Pan.“Americans have operated as if we can fly, borrowing increasingly enormous sums of money while making believe it need never be paid back, while Wall Street has cavorted across an island of unlimited adventure with no adult supervision,” he writes.Goodman doesn’t break a great deal of new ground, but he effectively synthesizes a great deal of complicated information. He presents his reportage and analysis in chapters that are long enough to provide detail and context yet not so extensive that the reader gets bored.He draws on his own experience as a foreign correspondent in China to explain the workings of the Chinese economy and the mindset of that country’s business and political leaders. Those subjects are used as a springboard for discussing the implications of the rise in foreign investment and the growth in foreign countries buying American debt.Readers who monitor the housing market will find his discussion of the real estate bubble, during which time many consumers turned their homes into an ATM, to be especially enlightening.On a micro level, Goodman tells the story of Willie Gonzalez who moved several times to find work and was laid off several times because of the economy. Eventually, he landed in Florida and bought a home as a result of readily available financing. He put 2% down and used credit cards to buy furniture. He lost jobs and had his salary cut at others and, in the end, couldn’t afford the mortgage payments so he lost the house.While the reader may empathizes with Gonzalez, Goodman is careful not to portray him as an innocent victim of circumstance and documents the poor decisions that Gonzalez made that helped get him into his predicament.On a macro level, Goodman describes the efforts of some of the worst companies-Washington Mutual and Countrywide-to push risky products and to prey on consumers who weren’t always financially savvy.Combine dubious business practices with government policies that provided incentives for home ownership but didn’t adequately regulate how those policies were implemented and the result is an economic tsunami.While Goodman points fingers at those on both sides of the political divide, he’s a bit harder on Republicans and omits certain events from his discussion that might have presented a more complete picture.For example, he doesn’t touch on the Democrats’ opposition to efforts by congressional Republicans to place greater restrictions on the activities of the Federal Housing Administration, Fannie Mae and Freddie Mac. Also, he doesn’t discuss how some other well-intended legislation, such as the Community Reinvestment Act, caused banks to make some risky investment decisions.While much of the book is depressing, Goodman ends on a positive note with two chapters on how biotechnology and green energy have helped transform once dying manufacturing areas.Readers looking to learn about how the United States got into its economic mess and how that impacted the lives of real people will find reading Past Due: The End of Easy Money and the Renewal of the American Economy to be an enlightening and engaging experience.–[email protected]