This American Life - Podcasting On The Giant Pool Of Money AKA Mortgage Meltdown

If you are looking for an overview of the mortgage meltdown, a recent This American Life podcast provides an excellent comprehensive overview. They touch on just about every dynamic in 'the perfect storm' that led us to where we are today. Specifically, they hit on:

1. the "innocent consumer vs innocent banker" debate
2. excess global liquidity leading to poor evaluation of investment risk
3. abuse of low documentation financing*
4. CDOs and rating agencies
5. hot potato nature of the process between origination and securitization of mortgage loans
6. the unexpected end of house price appreciation, and how it exposed systematic problems
7. small banks vulnerability to leveraged wharehousing from larger banks
8. challenges related to loan modifications in the wake of securitized and derivitivized mortgages
9. why the "credit crisis" was not ever going to be confined to "Subprime"
10. why the credit crisis extend beyond mortgages into student loans, credit cards, etc.
    

Some criticisms from my point of view while listening...

1. Could use more of "The Nothing Song"
2. * from item 3 above, they fail to acknowledge the intent of low documentation financing and why these programs were really created in the first place.
3. did this "poor Marine" really think he could afford the home? Sounds like the broker was a creep, but would the Marine have been as willing to go along with all of this if he didn't expect the home to be skyrocketing in value?
   

This is well worth a listen. Its nearly an hour long, but if you are interested in understanding why it is currently much more difficult to borrow money to buy a home, why foreclosures are happening at a record pace, and how the natural motivation of greed causes financial markets to bubble up and pop every once in a while, then this is an hour you need to set aside.

If you want to measure this against the historical record of financial crisis, see "Manias, Panics and Crashes" by Charles Kindleberger.

If you want to look at this within the context of of chaos and complexity theories, and learn how we might predict when and where and how big the next financial crisis will be, see "Ubiquity: Why Catastrophes Happen" by Mark Buchanan.