Other People's Houses: How Decades of Bailouts, Captive Regulators, and Toxic Bankers Made Home Mortgages a Thrilling Business

by Jennifer S. Taub J.D.

Overview

The clearest explanation yet of how the financial crisis of 2008 developed and why it could happen again

In the wake of the financial meltdown in 2008, many claimed that it had been inevitable, that no one saw it coming, and that subprime borrowers were to blame. This accessible, thoroughly researched book is Jennifer Taub’s response to such unfounded claims. Drawing on wide-ranging experience as a corporate lawyer, investment firm counsel, and scholar of business law and financial market regulation, Taub chronicles how government officials helped bankers inflate the toxic-mortgage-backed housing bubble, then after the bubble burst ignored the plight of millions of homeowners suddenly facing foreclosure.
 
Focusing new light on the similarities between the savings and loan debacle of the 1980s and the financial crisis in 2008, Taub reveals that in both cases the same reckless banks, operating under different names, received government bailouts, while the same lax regulators overlooked fraud and abuse. Furthermore, in 2013 the situation is essentially unchanged. The author asserts that the 2008 crisis was not just similar to the S&L scandal, it was a severe relapse of the same underlying disease. And despite modest regulatory reforms, the disease remains uncured: top banks remain too big to manage, too big to regulate, and too big to fail.

Product Details

ISBN-13:	9780300212709
Publisher:	Yale University Press
Publication date:	05/26/2015
Edition description:	New Edition
Pages:	424
Sales rank:	803,843
Product dimensions:	6.10(w) x 9.10(h) x 1.20(d)

About the Author

Jennifer Taub is a professor at Vermont Law School and formerly an associate general counsel at Fidelity Investments. She lives in Northampton, MA.

Table of Contents

Introduction: Lost Ground 1

Part I Highfliers

Chapter 1 The Nobelmans 9

Chapter 2 The Condo King and His Empire 17

Chapter 3 The Run on American Savings and Loan 34

Chapter 4 The Saturday Night Massacre 47

Chapter 5 Deregulation Inauguration 59

Chapter 6 The Red Baron of Finance 78

Chapter 7 The Bailout 97

Chapter 8 Friends of the Court 108

Part II Repeat Performance

Chapter 9 Friend of the Family 123

Chapter 10 The Factory Line 140

Chapter 11 The Bubble 163

Chapter 12 First to Fall 188

Chapter 13 Surf and Turf 209

Chapter 14 Legal Enablers of the Toxic Chain 222

Chapter 15 The Great Betrayal 247

Part III Myth Confronts Reality

Chapter 16 Dispelling Myths about the Crisis 269

Epilogue: Cast Again 284

Notes 303

Acknowledgments 385

Index 391

Interviews

Do the conditions that caused the financial crisis persist? Could this happen again?

Unfortunately, yes. In 2009 Federal Reserve chairman Ben Bernanke defended the multi-trillion-dollar bailouts, explaining that "it wasn't to help the big firms that we intervened. . . . When the elephant falls down, all the grass gets crushed as well." Today, the elephants are larger than ever, and the grass is still crushed. The top banks are bigger, and they still borrow excessively in the short-term and overnight markets, leaving them vulnerable to runs. But let's be clear. For most Americans, it's not a question of when the next crisis will hit, but when this one will end.
 
Why another book about the financial crisis? What's new here?

 I wrote Other People's Houses because I wanted to tell the story of the crisis from the perspective of homeowners. Many books about the crisis speak in broad concepts, or they dramatize the crisis exclusively from the vantage point of bank executives and high-level government officials. Homeowners who are included can appear randomly selected, like stock characters. Other People's Houses takes a fresh approach. The central narrative thread is the Nobelman v. American Savings Bank decision, a Supreme Court case that still prevents families from saving their homes through bankruptcy. My book uncovers the back stories of the associated homeowners, bankers, and regulators and traces them forward from the savings and loan debacle, through the toxic-mortgage-backed financial crisis, to the JPMorgan Chase $6 billion London Whale trading losses.

Editorial Reviews

A must-read for those wanting to understand what happened to the American Dream of homeownership and building wealth by paying off one’s mortgage. . . . Taub tells a riveting story.”—Steven Pressman, Dollars & Sense

Dollars & Sense - Steven Pressman

[Other People’s Houses] reminds us that the nation’s economic troubles were entirely preventable. [Taub] pinpoints the key decisions—primarily by presidents, cabinet secretaries, key members of Congress, and government bank regulators—that allowed banks to engage in an orgy of speculation . . . They knew what they were doing and what the consequences might be.”—Peter Dreier, The American Prospect

The American Prospect - Peter Dreier

"Over the years I’ve read a tall stack of books about the financial crisis. Other People’s Houses, by Vermont Law School professor Jennifer Taub, provides the clearest, beginning-to-end explanation I’ve seen of what went wrong. And Taub’s beginning is a surprise: A 1993 Supreme Court decision about how bankruptcy law applies to mortgages."—Pat Regnier, Money magazine

Money Magazine - Pat Regnier

Provides a concise, clear, and compelling account.”—Glenn C. Altschuler, Huffington Post

Huffington Post - Glenn C. Altschuler

Made the 2015 Must-Read Nonfiction Book List compiled by the Massachusetts Center for the Book

Massachusetts Center for the Book - Must-Read Nonfiction Book List

09/01/2014
In 1984, Leonard and Harriet Nobelman took out an adjustable-rate mortgage to buy a Dallas condominium. By 1989, they had lost their jobs, their monthly payments had risen sharply, and the value of their condo had dropped by over half. They attempted to reduce the mortgage principal through bankruptcy. Taub (law, Vermont Law Sch.) explains how the 1993 decision against them by the U.S. Supreme Court in Nobelman v. American Savings Bank resulted in the safeguarding of the rights of lenders at the cost of homeowners. The author tells how the financial landscape has evolved since that court decision with examples of predatory lending, industry avarice, and desultory government regulation. In essence, this title makes a strong case that while banks have been deemed too big to fail, individual homeowners have been treated as if they are "too small to save." VERDICT Taub's cogently written, accusatory work will interest a wide readership. She highlights the negative treatment of homeowners compared to that of banks and places over three decades of mortgage lending since the 1980s savings and loan (S&L) crisis in sharp perspective.—Lawrence Maxted, Gannon Univ. Lib., Erie, PA

Library Journal

2014-05-06
A business law expert shines a pitiless light on the subprime mortgage meltdown that kicked off the Great Recession.Remember the savings and loan crisis of the 1980s? Taub (Business Law/Vermont Law School) certainly does, and she spends the first part of her narrative exposing the roots of the 2008 mortgage crisis, revisiting the tale of Harriet and Leonard Nobelman, whose innocent purchase of a Dallas-area condo culminated in a 1993 Supreme Court decision that prevented them from modifying their home mortgage through bankruptcy. Victims of a land-flip-based investment scam, the Nobelmans were, finally, "too small to save." Meanwhile, all the decision-makers who, in a dizzying series of transactions, fueled the Nobelman mortgage received government support, and very few suffered negative consequences. In the second part of the book, Taub traces the housing bubble and mortgage crisis of the new century, which by 2013 saw 5 million homes lost to foreclosure and another 10 million still left underwater. Despite the drag of this negative equity on the fortunes of Main Street, Wall Street appears to be doing just fine. Unsurprisingly, perhaps, Taub finds the same players and practices that brought us the S&L debacle again responsible. She blisters the "legal enablers" who, by their acts or omissions, failed to corral predatory practices and wild speculation. She tells of regulators asleep at the switch and rating agencies beholden to their subjects, of acts by Congress and state legislatures, federal courts and various rule-making agencies, all of which favored the big and powerful financial players. She concludes by dispelling some of the absurd myths surrounding the entire debacle, among them that "nobody saw it coming," that "there was not widespread fraud and abuse," and that the real fault lies "with greedy homeowners who borrowed money and did not pay it back."Meticulously argued and guaranteed to raise the blood pressure of the average American taxpayer.

Kirkus Reviews

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