Financial Shock

A 360° Degree Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis

by Mark Zandi

Number of pages: 288

Publisher: FT Press

BBB Library: Economics and Investment

ISBN: 9780137142903

About the Author

Mark Zandi is chief economist of Moody's Analytics, where he directs economic research. He is co-founder of, which was acquired by Moody's Analytics in 2005. Dr. Zandi’s broad research interests encompass macroeconomics, financial markets and public policy.


Editorial Review

Watching a financial crisis feels much like watching a natural crisis; as long as you are watching from distance. Although one is made by man and the other isn’t, there is something deeply mysterious about each; it isn’t quite clear how or why, or why now. Of course, each can create enormous damage and can be breaking for those directly involved. The repercussions last well beyond the immediate shock; nearly everyone is affected at least indirectly, and each leaves scars that never entirely disappear.

Book Reviews

"This is a serious book, one that explains the roots of our crisis. If you haven’t understood it in a systematic way from reading my blog, or those that I recommend, this book will give you a coherent explanation of how we got here." Aleph Blog

"Financial Shock is a timely read in in light of today's economic crisis. It has served me well in educating me as to the behind-the-scenes causes of the financial shock that we are all feeling. Dr. Mark Zandi, chief economist and cofounder of Moody's, gives simple and helpful advice on how to avoid/mitigate the damages of the next bursting bubbles." Hantla

"Financial Shock is a look back at the things which put us in the market and economic situation we’re in right now vis-a-vis the mortgage and credit markets." The Essentails of Trading

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Wisdom to Share

Government’s role in the mortgage market is still large, but it has steadily diminished over the past 25 years. Private sources of mortgage credit overtook government sources at the start of this decade and now account for some 60% of mortgage debt outstanding.

Rising home prices together with higher interest rates undermined house affordability even more.

It wasn’t the mortgage losses per se that ignited the shock, but they meant more broadly: Global investors had taken no too much risk, not simply in their subprime mortgage security holdings, but arguably in all their investments.

By 2006, most subprime borrowers started to put down little or no money of their own on their homes, meaning they had little to lose.

Watching a financial crisis feels much like watching a natural crisis; as long as you are watching from distance.