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Rating:  -
This author sells himself as an advocate for the poor, while spending nearly 200 pages exonerating businessmen for their responsibility in the housing boom and bust. That's false populism at its worst.
Sometimes, a book comes along that's a refutation of itself. I have to include this one on that list. The author's two main themes are inherently contradictory: 1. the housing boom and bust was created by restrictive land use laws (pushed in the name of protecting the environment, open spaces, and preventing sprawl) that drove up housing prices to unsustainable levels, creating a bubble; and 2. the housing boom and bust were created by quotas, forced on unwilling businesses by the government and community activists (such as ACORN) which were unsustainable, and caused a bubble and bust.
The relevant question related to these two factors is: which is it? Was the boom created by too much housing for the poor which couldn't be paid for, or ridiculously expensive housing, for which prices couldn't be sustained?
Sowell fingers a few markets as culprits for pushing the housing bubble, such as San Francisco, while at the same time he argues that poor blacks have been unable to live in these areas any longer because of unsustainable growth in pricing. Sounds feasible, that poor minorities can't afford over priced neighborhoods, but how does that legitimate his argument that the bust was created by an overabundance of housing for the poor?
Furthermore, it doesn't take much investigation to find that both of Sowell's arguments are the product of fitting facts around ideology, rather than the other way around. Take the city of Chicago (and illinois more generally), one of the areas hit worst by the boom and bust. What areas of Chicago were worst hit? It turns out they were Kane and Will County, interestingly the areas 1. with the worst sprawl and weakest land use restrictions, and 2. the areas that were overwhelmingly white (more than 80%) and well above the median family income for the area (more than $60,000 and $80,000 respectively for both counties, compared to $40,000 for the city of Chicago). In short, the housing bubble was created in an environ. characterized by little to no land use restrictions, and in areas where well off, affluent whites purchased homes. I've long lived in these areas, so it's hard to take Sowell's arguments seriously when they are directly refuted by the reality on the ground.
There are plenty of other problems with this work. Many have been discussed in other reviews. To list a few briefly: Sowell conflates Community Reinvestment Act related loans with Subprime loans, and they are not the same. In fact, most CRA loans are not subprime loans, and the growth of CRA loans overlaps little with the period where subprimes grew the most and when the bubble grew the most.
Furthermore, Sowell's "literature review" covering bankers' discrimination against the poor (in the area of mortgage loans) provides literally no evidence that racial discrimination is not a factor in loan granting. He simply tries to poke holes in existing studies that do show racial discrimination, and such attempts are not very convincing. In order to discount the Boston Fed Reserve study that demonstrates that banks discriminate in loans based upon race, Sowell cites an alleged Washington Fed. Reserve study that purports to refute the Boston study. Unmentioned by Sowell is that this is NOT a fed. reserve study. It is posted on the Fed website, but is explicitly advertised as not reflecting the views of the Fed. Rather, it's an unpublished paper from a student's doctoral dissertation. This is not the same as a fed study, which confers that it benefitted from the full weight and resources of the fed in research and in vetting. Furthermore, even a cursory reading of the study shows that it doesn't refute the Boston fed study, but supplements it, as the author finds that race IS a major factor in denying loans for minority "marginal applicants," when compared to white "marginal applicants."
The other study Sowell cites that purports to refute the Boston Fed study is published by an economist who also bizarrely argues that the CRA and ACORN created the housing bust and ecno. crisis. This narrative has been long refuted by the Fed, economists, and anyone else who has seriously looked at this issue.
Finally, Sowell's book completely exonerates corporate greed as a factor in the rise of subprime loans. All blame, he alleges, can be laid at the doors of govenrment and groups like ACORN. There's little reason to take such class war-motivated arguments seriously, especially when there's already fine work out there from industry insiders (in books such as "Confessions of the a Subprime Lender," by Bitner) which go into great detail about the greed on Wall Street and among subprime companies in creating this crisis. Tellingly, Bitner lists the banks, credit rating agencies, adn subprime companies as the primary actors in the housing boom and bust, and the Fed (and other government activites) as secondary actors. He paints a picture of the crisis in which the private sector had little to no oversight from the government, in direct refutation of Sowell's argument that the crisis was created by govenrment imposing itself on the private sector. The reality is that private companies, operating in pursuit of fabulous profits, couldn't get enough of subprime loans, under the tacit assumption that the government would bail them out if there was a problem (which is exaclty what happened). It was the securitization of subprime loans, backed in part by assumption that government sponsored entities like Fannie Mae and Freddie Mac would back such loans, that drove this corporate greedfest in the housing boom.
The biggest problem with this book is that Sowell is eager to lay blame at the hands of government, while exonerating corporations for their greed in creating unsustainable housing. I have no problem laying much of the blame on officials who deregulated derivatives and let subprime borrowers run wild with little to no accountability (a point made again by Bitner in Confessions of a Subprime Lender), but you can't exonerate corporate America from this process short of relying on propaganda and deception, as gov-business incest is the norm in American political economy, not the exception. Sowell seems to be unaware of this, repeating tired dictums about the virtues of "free markets," which have never existed in American politics, and never will exist. My recommendation is to find another book that seiously discusses the econ. crisis. I'd recommend Bitner's book, or Stiglitz's new "Freefall." They are written by people with far greater expertise on these topics.
Rating:  -
If you want to understand how the good intentions of politicians can have dramatic negative consequences for an economy read this book.
I also recommend his book Basic Economics.
Thank you Dr. Sowell!
Rating: -
After reading almost all the books written by Thomas Sowell this one did not disappoint. Sowell does his job as a myth-buster of popular housing myths. Very well written and easy to read, I went through it in one Business Trip to New Jersey and back. I wish everybody had to read this.
Rating: -
All Americans must read this book to understand how THE GOVERNMENT should stop trying to control our lives.
Rating: -
Read this to get a balanced summary of what put our economy in this wretched condition...
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