The The Mortgaged Decade: 1998-2008 and the Long Hangover

On July 11, 2008, Countrywide Financial, a huge California mortgage broker, bankrupted. It was one of many financial industry blowups of that disastrous year. Bear Stearns had already collapsed in March, nearly bringing down its largest Wall Street investment banking rivals, even Goldman Sachs, and by fall epidemic devastation required multi-billion dollar government bailouts. But Countrywide, and its once-admired but henceforward reviled CEO, Angelo Mozilo, perfectly incarnated the financial folly and hubris of the whole preceding ten years.

Countless books and TV documentaries about the 2008 Crash have since appeared, full of explanations and accusations. The best ones have identified most of the proximate causes of the disaster, all including the proliferating ‘subprime’ mortgages and complex derivatives based on them. But most were deficient in providing historical context. The most dubious claim, made by many academic economists and governmental authorities, was that ‘no one had seen this coming’. In reality, lots of people had, including me, with a 2003 Policy Options article, ‘Risky Business and Rocket Science’, about dodgy ‘mathematical’ models to justify many dazzling baubles.

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