Why it went pear-shaped in the U.S.

There is a saying that goes, “Don’t get mad, get even.” More recently, it went, “Don’t get mad, get wealthy.”

For a while, at least, it seemed that wealth was the best revenge. It allowed you to live in a nice suburban house with a white picket fence and a perfectly manicured lawn.

But what happens when this dream comes crashing down?

“The Economic Tsunami,” by Bruce E. Henderson et al., vividly illustrates the pain that Americans have been through since the onset of the subprime crisis. The book is published in Korea under the title “Sub-prime Crisis.”

The authors claim that the government is responsible for the disaster. President George W. Bush vowed to make the American dream possible for all citizens through lowering interest rates, revising loan criteria and qualification, and giving deserving people a helping hand. But, the authors argue, these good intentions became a policy that “stole” people’s properties and wealth.

So why did this happen? Because the greedy market economy tried to get a share of the pie, according to the authors. Banks started to lend money competitively, skipping the process of credit checks and lending money to bad creditors. Mortgage intermediaries and banks enticed borrowers with sweet talk. Investment banks took on the risks of mortgage banks by selling mortgage-backed derivatives.

With such enormous amounts of money centered on the real estate industry, housing prices started to skyrocket, and everyday people became investors. These are the same people who lost out as the market crashed.

The authors are also strikingly negative about the former chairmain of Federal Reserve Board, Alan Greenspan. Once praised as a hero of America’s economy, Greenspan is, according to this book, one of the chief engineers of the subprime mortgage crisis.

There are numerous books being published nowadays on mortgages and the financial crisis that has caused a global credit crunch. Among such books, The Economic Tsunami is not one that will garner high points for details or in-depth coverage.

Nevertheless, this book is certainly the easiest to understand because it also deals with the ordinary citizen directly hit by the crisis. The ordinary citizen generally dreamt of having the stereotypical home seen in Hollywood films. To realize their American dream, they borrowed money, but that suffocated them in the end.

As the bubble burst, housing prices plummeted and interest rates spiked, people who borrowed heavily fell behind in payments as they could not keep up with the rising interest rates.

Houses put on the market weren’t selling and as a result those who borrowed lost their houses to creditors. This book is a story about these people.

I sincerely hope that President Lee Myung-bak, who has vowed that everyone will get a house during his term, reads this book. It will show him how many ordinary U.S. citizens are in pain and how the world economy is at risk because of a policy implemented by a president who had the exact same thoughts as President Lee.

Author: Bruce E. Henderson and others

Genre: Current Affairs

Publisher: Random House

[estyle@joongang.co.kr]