thomas sowell IS the smartest man in america! what else can you say. sowell can take any issue, no matter how complicated, and explain it in layman's terms.

At a time of global economic crisis, in all of the talk of a subset of that crisis, the housing boom and bust, it is easy to lose sight of the fact that the cause of that bust is so very simple. "Behind all the esoteric securities and sophisticated financial dealings are simple, monthly mortgage payments from millions of home buyers across the country." When the housing payments slowed or stopped, sometimes by necessity and sometimes by choice, the boom turned to a bust. Real estate markets that had seen an unparalleled explosion of growth suddenly saw a catastrophic fall. Behind all the talk of stimulus and bailouts and increasing billions and trillions of dollars is normal people unable to make their $1000 or $2000 monthly mortgage payments.

In The Housing Boom and Bust, conservative economist Thomas Sowell looks to the housing bust and asks the simple, bedrock question: Why did so many monthly mortgage payments stop coming? His answer is as simple as it is lucid. The mortgage payments stopped coming in because during the housing boom, a time where interest rates were at historic lows, mortgages had been given to people whose prospects of repaying them were, at best, very poor. While the banks deserve some of the blame, they were in fact forced to hand out risky loans by government policies that imposed arbitrary quotas set by people whose concern was far more political than economic. These people, in the name of affordable housing and under the banner of political correctness, demanded that loans be provided to people who, under normal circumstances, could not afford them. This pressure caused financial institutions to hand increasingly "creative" (read: risky) mortgages to increasingly risky (read: poor) clients. When normal times resumed and interest rates rose, so too did payments. When payments rose, they became unaffordable and millions of people simply walked away, unable or unwilling to cover the new costs. "Why pay a $500,000 mortgage on a $300,000 home?", they reasoned. Faced with a glut of foreclosures, banks began to offer homes at fire-sale prices, driving down costs across the market. The bubble burst, the banks began to fail and the government began printing vast quantities of money to stimulate the economy and to bail out the banks. The story continues.

In just 148 pages, Sowell explains where this crisis came from and the events that caused it all to come to a head. Along the way he powerfully exposes the cause of rising housing costs and the folly of affordable housing. As he has done repeatedly elsewhere, he exposes the fallacy of racism in lending institutions, showing that much of the blame must be laid at the feet of politicians. "Politicians in Washington set out to solve a national problem that did not exist--a nationwide shortage of `affordable housing'--and have now left us with a problem whose existence is as undeniable as it is painful." Of course Sowell also proposes a way out of the mess and those who know him will not be surprised to learn that he lobbies for laissez-faire, allowing the economy to sort itself out without massive government intervention.

As he looks to the government's reaction to the crisis, Sowell's predominant concern is that the government, led by President Obama, will follow the words of chief of staff Rahm Emanuel, who said, "You never want a serious crisis to go to waste. ... it's an opportunity to do things you could not do before." The government has an almost unparalleled opportunity to use this crisis to "fundamentally and enduringly change the institutions of American society." Yet the reality is that, for all their flaws, these institutions have had an incredibly successful track record over the past two centuries, this crisis notwithstanding. "What is now being proposed is to jettison all that for the sake of untried theories, because of an economic situation that has arisen in a relatively few years as a result of government interventions with a terrible track record that have led to a crisis that now provides an opportunity for more of the same--in the name of `change'." As the government increases its control over the American economy it essentially buys up the freedom of its people with their own tax dollars.

In The Housing Boom a Bust Sowell provides a plain-English explanation of the economic disaster and one that anyone can read, understand and enjoy. Though the book must have been written in a hurry, it shows none of the usual marks; instead, it is well-written and well-edited. Published just a couple of months ago but dealing with today's issues, it reads almost like a newspaper or magazine article. If you, like me, have tried and failed to understand the cause of the crisis, this is the place to begin. Sowell is a steady and trustworthy guide.

Sowells' "The Housing Boom and Bust" is a clear and concise exposition of how the US got into the current financial mess. I especially like the chapter which discusses the role of too little or too much regulation (P57). It puts paid to any arguments that the financial crisis was due to lack of regulation. Sowell shows how the opposite is true: excessive govenment intervention and regulation have actually created the crisis.

Succinct overview of how U.S. home mortgages work. Detailed analysis of what caused the housing melt-down, as well as who the many culprits were and what they did. A must-read for anybody who wants to thoroughly understand this economic debacle.

Interesting parts: Govt not just approved lax standards but was driving force behind them. Crisis was most severe where tight land use restrictions had raised house prices beyond reach. Adjustable rate mortgages (ARMs)had been used in Europe for decades without causing a crisis, so it is not clear that ARMs were the problem. Community Reinvestment Act based on premise of discrimination against minorities but statistics regarding lending to asians belies this premise.

There is a great summary of the events leading to this crisis starting on page 127.

I have lived in CA for the last 30 years and have watched the price of my home increase by 800% up until 2005. I feel that Sowell has put together a "fairly" good book and there is no need for me to expand on what is correct since those items are well covered in other reviews. However I believe that it is lacking or incorrect in a two areas and would like to add comments to those items only.

1. There has not been a housing bust in the US "yet". Prices have merely declined to a point that puts them right on target with the normal year to year growth that has been taking place since the 1950s. Check out the US government statistics on this.

2. Prices increased in CA and other selected areas of the US due mainly to employment opportunities not due to building restrictions. People can't buy what they can't afford, at least prior to the recent sub-prime and ARM loans. The tremendous job growth created in Silicon Valley was behind what took place in Bay Area CA housing. And it all may be coming to an end.

Bottom line is that I still highly recommend reading this book and prepare for the upcoming Depression which will really start in 2010.

/DaveB

I've admired Thomas Sowell's work for a long time. This book offers a clear explanation of a complicated situation. It is highly credible and easy to understand. It provides justification for our suspicions about the politicians whose mighty egos and lust for power got us into this fine mess. These are the same politicians who are still lying to us while they even now continue to hold office.

To those who have taken even one course in Economics the root of the problem is obvious: the U.S. government decreed that housing would be affordable --without any regard to the underlying realities. The government FORCED banks and other lenders to lend to people whom they otherwise would not have lent to. This resulted in Fannie Mae and Freddie Mac bloating up on loans that were not likely to be paid back, and in turn selling securities based on those worthless loans to a variety of Wall Street firms and foreign investors, all in the name of "affordable housing." By "bloating up," I mean to the tune $2 trillion dollars, a debt greater than the GDP of all but four nations.

All along there has been no shortage of economists, bankers, and other smart people who knew this was wrong, stupid, and dangerous. And their warnings were blithely ignored by politicians aspiring to become heroes of "affordable housing."

As usual, Dr. Sowell has no compunctions about naming names. Congressmen and presidents from both major parties are indicted: Barney Frank, Joe Baca, Maxine Waters, Frank Raines, George Bush (I and II), Bill Clinton, Janet Reno (who threatened to sue lenders who did not lend based on the race of borrowers, rather than their ability to repay loans), and --and this breaks my heart-- even Sen. Kit Bond (R-Missouri), who took $95,000 from Fannie Mae and Freddie Mac PACs.

And as usual, Dr. Sowell answers the question, "What happened?" quite clearly. The facts could not be plainer. Suppose I say, "The goverment should pass a law that everyone should be able to afford a beach house in Malibu." You would say that that can't be and I would ask, "Why not?" Your answer would be this book, but with regards to an only slightly-more-obvious example. America got a big dose of socialism, and now the inevitable result: a big dose of poverty.

There is also a fascinating chapter that revisits the Great Depression, the New Deal, and WW II.

To those who have taken even one course in Economics the root of the problem is obvious: the U.S. government decreed that housing would be affordable --without any regard to the underlying realities. The government FORCED banks and other lenders to lend to people whom they otherwise would not have lent to. This resulted in Fannie Mae and Freddie Mac bloating up on loans that were not likely to be paid back, and in turn selling securities based on those worthless loans to a variety of Wall Street firms and foreign investors, all in the name of "affordable housing." By "bloating up," I mean to the tune $2 trillion dollars, a debt greater than the GDP of all but four nations.

All along there has been no shortage of economists, bankers, and other smart people who knew this was wrong, stupid, and dangerous. And their warnings were blithely ignored by politicians aspiring to become heroes of "affordable housing."

As usual, Dr. Sowell has no compunctions about naming names, and congressmen and presidents from both major parties are indicted: Barney Frank, Joe Baca, Maxine Waters, Frank Raines, George Bush (I and II), Bill Clinton, Janet Reno (who threatened to sue lenders who did not lend based on the race of borrowers, rather than their ability to repay loans), and --and this breaks my heart-- even Sen. Kit Bond (R-Missouri), who took $95,000 from Fannie Mae and Freddie Mac PACs.

And as usual, Dr. Sowell answers the question, "What happened?" quite clearly. The facts could not be plainer. Suppose I say, "The goverment should pass a law that everyone should be able to afford a beach house in Malibu." You would say that that can't be and I would ask, "Why not?" Your answer would be this book, but with regards to an only slightly-more-obvious example. America got a big dose of socialism, and now the inevitable result: a big dose of poverty.

This was the best book I have ever read concerning the housing diaster. I love how it goes into detail of how this actually started back in the 70's. It was precise and to the point. EXCELLENT!!!! EVERYONE SHOULD READ THIS BOOK.

Thomas Sowell has written an explanation of the root causes of our present economic turmoil using wisdom, keen analysis, and common sense. This is the 43rd book by Sowell, who is 79 years old. His dedication to the use of readily understandable words and concepts has reached perfection in the present study. A quote from his magnum opus, "Basic Economics," is pertinent to the issues at hand: "Economic policies need to be analyzed in terms of the incentives they create, rather than the hopes that inspired them."

This is a short work and confines itself to the basis of the economic meltdown. It does not describe what followed after the bust of the housing market; the breakdown of mortgage-backed derivatives such as stocks and securities. Sowell says on page 126, "...these are things downstream from the fundamental source of risk, the lowering of standards for making mortgage loans and the resulting delinquencies, defaults and foreclosures."

The 1970s spawned numerous liberal and idealistic movements, one of which was the "conserving" of "open space." A rapid spread of laws followed, restricting land use. A good example of the result is San Mateo County in California. By local government laws half of San Mateo County became "open space" and home building was restricted, This artificial scarcity of land drove up the price of the remaining land creating conditions in which modest homes became million-dollar homes. (Land is far and away the most expensive cost of buying a house.) This example is a microcosm of what took place in many areas of America from the 1970s onward, including both coasts, Virginia, Kentucky and elsewhere.

To counter the rising cost of homes, a cry for "affordable housing" arose in the political arena. This was seen by numerous liberal politicians as a "national" problem. (However for the country as a whole housing was still affordable - Sowell provides the empirical proof.) But once politics entered the arena, the economy of the market was destroyed.

Government lending organizations were pressured and new ones formed, and pressures were put on banks to approve loans to minorities and those with low incomes. This led to creative mortgaging, such as adjustable rate mortgaging, and eventually to loans being approved for persons who did not have the means to make the mortgage payments. Lax lending led to more demand which led to higher prices and more building which again led to more lax lending in a vicious circle. This was done on an enormous and ever expanding scale. And the problem was not "under-regulation" but "over-regulation" of the banks by the Federal Government.

Eventually there came a day of reckoning, and the lax lending standards which had existed for over a decade and caused home prices to skyrocket came to an end. Millions upon millions of loans defaulted. The market was flooded with foreclosed properties. The subsequent decline in home values began in 2004, proceeding and accelerating after that point.

Sowell does not end his analysis with hopes toward a brighter future. In fact he suggests it is likely that the Obama administration will use the crisis to impose new and enduring changes in the American economy and society. It is likely that the very governmental interference in the economy that brought on the collapse will not only continue, but will be expanded. Sowell doesn't say so in so many words, but the implications are unmistakeable: Socialism is the spectre that haunts present day America.

Thomas always explains things in a way that I can understand. i have done some of own research on the housing bust.
bankers have told me that they no longer give aplicants advice when applying for a home loan. they no longer care if the ever gets paid. fanney freddie will buy the loan from them. the bank gets their money anyway.

A good read. I recommend it.

With the death of Milton Friedman, 79 year-old Dr. Thomas Sowell is currently America's foremost economist.

To the low graders who complained mainly that the esteemed Sowell 1) did not spread the spreads blame to all areas and 2) that the book was too short, I offer:

1. If you look closely, especially at the end of Part 1 and elsewhere, like the onset of Chapter 2 (pretty prime areas) he most definitely did. In fact, I believe he was too wishy-washy and "relative" in blame, when factual sources agree that the preponderance of political blame goes to the Democrats who supported & funded Fannie and Freddie: Dodd, Barney Frank (culprit #1), purely evil George Soros, Obama, Princess Pelosi, Maxine Waters, Chuck Rangel, et al. (You know, the incompetent radicals who run the Democrat party, congress and our nation, so help us G-d). And then the "community activists" (wasn't that Obama's first job?) who, for transparent reasons, pressured banks into making concessions and risky loans to people not normally approved.

Sowell blames George W. Bush's "compassionate conservatism" for spending so much time and federal money assuring poor folks & so-called "minorities" the chance to own their own home. But Bush also repeatedly warned Dodd and the Dems to reform and reconsider Fannie and Freddie. They said he was "ill-advised" and signed petitions opposing him. As usual, Bush was right and they were wrong! There was no issue of "de-regulation" or other clichés muttered by the uninformed, but rather TOO MUCH government regulation and oversight in liberal enclaves like California where environmentalists take away prime real estate. These unnecessary rules were directed toward the "politically popular goal of more "home ownership" through "affordable housing," especially for low-income buyers." (p. 57)

Did CNN report this? No, but Sowell does. He also dissects and dispels the claims by ACORN & other "activist" groups of "racial discrimination" in lending, which kills the economy to fill the pockets of victicrat salesmen (on the left, of course.)

Sowell also spreads the blame to, brace yourself, the American homeowner. Can you believe he'd do this, and ask us to be mature, self-reliant and take responsibility? Well, 60% of us would not, I bet. We're far better than the selfish, lazy Euros, but Americans need to remember the bravery, individualism and bootstraps mentality of our ancestors and current heroes, not lazy leftists.

And he also, importantly, explains to the followers of cliches or revisionism, that FDR's social programs in the New Deal INCREASED unemployment and did NOT aid the economy. Only WW2 saved us from a second "depression" and got the economy rolling again. Government regulation & social engineering from the rich hypocrites of the left, as usual, caused this mess, via "making housing affordable to all." And if you know history (schools make sure we don't), FDR & Obama's choices hurt the economy far more than they help. Free markets self-correct.

Like 9-11, "Never Forget" that Americans still produce more output than India and China despite having eight times fewer the populace. And naturally, we produce more output than Japan and the socialist states of France, German, England COMBINED. But yes, let's model ourselves after Eurabia, which will cease to exist w/in a century.

But I do digress...

2. Even in the age of Obama, the socialist hypocrite Paul Krugman is unable to write reputably or compose a book such as this, folks. This is the first (of many) extensive crises brought by "hopenchange" to America, and from which we now have four to eight years of misery and naiveté ahead.

As Sowell notes toward the book's closing, the current Administration is "using a crisis to fundamentally and enduringly change the institutions of American society." You know, the ones with a better track record than any nation on earth the past two centuries. The left does not care. They see America as evil, mean and wrong. Ask Barack's wife.

Just ask Rahm "never let a serious crisis go to waste" Emanuel, Obama's delusional Chief of Staff.

The length of Sowell's book is also very good. It is footnoted perfectly. Does anyone, at least right now in the immediate aftermath of the mess, want elites going on and on with witty theories and unnecessarily large words and paragraphs? Sowell is pithy and poignant instead.

"The Housing Boom and Bust" is fair and timely. It is a primer, and I give it five stars for sure, considering the accuracy of the info and especially the quick release.

Thomas Sowell gets it absolutely right!! He concretely explains what went wrong and who is responsible. Reading this book should get you mad at Congress, the Senate, the President(s) and all the government officials that messed everything up and then want to shift the blame like they always do and then try to take credit for the solution to the problem. This is a must read!!!!

YOU NEED TO READ THIS BOOK. It presents the facts about the economic and political problems this country is facing. People will whine and complain that it is slanted and portrays democrats in a bad light, however it also critiques republicans and their poor economic policy. Yes this book advocates a free market but it does so in an unbiased analysis of factual information. Thomas Sowell is not a politician, there is no political BS to sift through. No fudging of figures and no games. Read it, form your own opinion, and help us save our country and its leaders from making the same mistakes.

This is not a treatise on the subject, but an essay, so people complaining about non-inclusive treatment of all possible facets are wrong. One should also ignore comments associating Tom Sowell with Limbaugh or Hannity. They do not blong to the same galaxy of intellectual accuity. You will notice that those who offered one star to this book are of a certain ideological slant complaining about the other kind of ideological slant. Need one say more about how objective they are? The book is not flawless but solid.

I enjoyed reading the book a lot ! The main weakness in my view is that some trivial points are explained in more details than I needed but that can be a great thing for a lay audience book ...

It is not possible for me to write a review of this book as I have not received it. I have emailed you about this, and you have not responded. I am not very impressed with your service in this regard.

Patrick Kearnaghan

Well written and documented. Very readable. Makes extremely clear what happened, how we got where we are, and who was to blame. For anyone who wants to take corrective action at the polls, this is a huge wake-up call.

Thomas Sowell is a people's economist. His data, analysis, and research discipline are apparent, but it is all very understandable and persuasive to the ordinary reader. His conclusions are well supported and he exposes the hypocrisy and lack of accountability among policy makers who manipulated the lending protocols of the housing market which led to the crisis. His dispelling of the conclusions that drove the policy makers intrusion into the housing market - such as housing was universally unaffordable - is quite compelling. Great book!

Thomas Sowell in his book, "The Housing Boom and Bust" describes what happens when good intentions go bad. There were decisions made by politicians and pressure from others that were meant for good. The consequences of these decisions are the "rocking" of the economic system around the globe.

This book is easy to read and very in-depth. Very well written.

Thomas Sowell writes a very easy to read and thoughtful book on what happened to bring about the current housing boom and bust. He names names and points fingers. Lots of people will not like it, but it is something that should be read if for no other reason so we can learn and try to prevent it from happening again.

Thomas Sowell has written some wonderful books; they are always clear, concise, factual, and to the point. But this one is the best yet. If you wonder how our economy got into this mess, look at this completely factual, easy-to-read explanation. Sowell points the finger at all of the government entities, NGOs, and at both sides of the aisle, in explaining why our economy is suffering. All the data is here to prove what happened, and for we citizens to determine whether we want it to happen again.

Reading this book, it is fairly obvious that the author is no fan of government regulation. He dissects the government's actions and policies and places the blame squarely on the politicians in Washington that the author believes are solely responsible for this crisis.

Missing from this rather short work, however, is any placement of blame on banks and other financial institutions, and a failure to blame individual behavior of home buyers. Although I am not an economist, it is fairly obvious to me that this is a much more convoluted problem than simple over regulation by the government.

While the author has done a good job with what he has written, sadly he is so overcome with a dislike for the government that he has failed to fully analyze the causes of this meltdown.