Nonfiction review: Busted: Life Inside the Great Mortgage Meltdown

NONFICTION

Few homeowners facing foreclosure have had the opportunity to share their financial travails privately with Alan Greenspan, the former chairman of the Federal Reserve. In fact, as Edmund L. Andrews writes in his cautionary book, "Busted: Life Inside the Great Mortgage Meltdown," he may be the only one.

Of course, Andrews approached Greenspan as an economics reporter for The New York Times, not as a troubled homeowner, which may explain Greenspan's reaction.

First, Greenspan "looked appalled," Andrews writes. "Then he looked perplexed. And for the first time that I could remember, his patient and gravelly voice turned curt and commanding. 'Why did you do it?' he asked, interrupting me in midsentence. I felt like a teenager who had just told his father he had crashed the family car."

Readers may sympathize with Greenspan's reaction -- at least, those readers who haven't been caught short by the recession. (I'll pause while all three readers unfazed by credit-card debt, collapsing home values and freefalling 401(k) plans take a self-congratulatory bow.)

Andrews' financial troubles began in 2004 when, in the middle of divorcing his first wife, he and his future second wife bought a house. They would need the extra space, he reasoned, to accommodate her two youngest children from a previous marriage, as well as his own sons when they visited on the weekends.

Because more than half of Andrews's take-home pay went to his first wife for alimony and child support, no lender would offer a mortgage if it understood his financial predicament.

Being unable to make loan payments wasn't a significant impediment in the go-go days of the housing bubble, though. Andrews simply applied for a so-called liar's loan, which didn't require him to document his income or financial liabilities.

Soon, he secured a $500,000 loan, bought a cozy house in Silver Spring, Md., and settled into the American dream . . . until the bubble burst.

In less than two years, Andrews and his second wife ran up $50,000 in credit-card debt. They refinanced the house twice to pay down the credit-card debt and cover their monthly bills, but that didn't work either. And still they kept spending.

"We had very different ideas about money," Andrews writes. "She refused to scrimp on top-quality produce, Starbucks coffee, bottled juices, fresh cheeses, and clothing for the children and for me. . . . I was almost exactly the opposite. My answer to any money problem was to stop spending."

Perhaps inevitably, the couple's conflicting notions about money threatened to end their marriage, and Andrews doesn't soften his account of their arguments. (Or at least I hope he didn't; they're all sharp elbows and biting insults, and loading a pair of dueling pistols would seem like the next logical step.)

In addition to pulling back the curtain on his own financial travails, Andrews leads us through a nightmarish labyrinth haunted by the bogeymen of bad banking. Among them are the dreaded toxic mortgage-backed securities, which helped obviate the worries Andrews' lenders might have had about his ability to pay back his loans.

"My mortgage company hadn't cared, because it would sell my loan to Wall Street," Andrews writes. "The Wall Street firms hadn't cared, because they would bundle the loan into a mortgage-backed security and resell it to investors around the world. The investors hadn't cared, because the ratings agencies had given the securities a triple-A rating. And the ratings agencies hadn't cared, because their models showed that these loans had performed well in the past."

It's a harrowing journey, and Andrews hasn't found his way back to daylight yet. As of February, when he wrote the book's introduction, he was four months past due on his mortgage "and bracing for foreclosure proceedings to begin." The title of the book's last chapter is particularly ominous: "God help us all."

One assumes that Andrews hopes robust sales of "Busted" will rescue him from his financial troubles. If the plan works, Greenspan can celebrate: Unfettered capitalism works, after all.

Doug Childers is a Richmond writer and edits WAG, a literary Web site at http://www.thewag.net.