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| The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It | 
 enlarge | Author: Robert J. Shiller
Publisher: Princeton University Press
Category: Book
List Price: $16.95
Buy New: $9.85
You Save: $7.10 (42%)
Buy New/Used/Collectible from $9.00
Avg. Customer Rating:  (21 reviews)
Sales Rank: 1856
Languages: German (Original Language), English (Unknown), English (Published)
Media: Hardcover
Number Of Items: 1
Pages: 208
Shipping Weight (lbs): 0.9
Dimensions (in): 8.5 x 5.8 x 1
ISBN: 0691139296
Dewey Decimal Number: 332.722
EAN: 9780691139296
ASIN: 0691139296
Publication Date: August 24, 2008
Availability: Usually ships in 1-2 business days
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| Customer Reviews:
 Clear and insightful book on the subprime crisis October 15, 2008
0 out of 1 found this review helpful
Robert Shiller's book doesn't warrant some of the negative reviews on here.
In an age of talking heads and pundits who argue more so on the basis of philosophy than on any factual evidence, this book's clear and evidence based examination of the subprime crisis comes as a refreshing alternative. Shiller, a Yale professor of economics, overcomes any temptation to over complicate or to talk down to the reader and gives a frank and detailed assessments of the current mortgage mess, the reasons we're in this crisis, and the possible short and long term solutions.
While Shiller explicitly states his view on framing a short term bailout in the early chapters, he has not written a policy paper. Instead, the book is a collection of thoughts and ideas of what would strengthen our financial institutions for the future - ideas like cpi adjusted standards of accounting (unidad de fomento) to weather periods of inflation/ deflation, subsidized financial planning to encourage savings and prevent speculation, and government sponsored financial watchdogs to assist the private investor.
Interestingly, Shiller anticipated the anger and the frustration that many average mainstreet americans feel about the current crisis. He warns against excessive finger pointing at officials, borrowers, and lenders. For one thing, they were all trapped in a flawed incentive system. He points to the disaster of the German reparation after WWI as a warning against letting the desire to punish go rampant and cloud pragmatism in making policy. Instead Shiller makes practical recommendations and suggests that once we are out of the current mess, we should structure our financial institutions to prevent future crisis, design insurance against economic/financial downturn, and actively integrate economic theory in public policy.
A more controversial topics that Shiller touches on is the role of future markets and derivatives. Here, instead of opting with most financial writers who are now so enchanted with the Buffetian quote about mass financial destruction, Shiller recommends more derivatives and more future markets as a part of the "subprime solution." Although I am convinced by his argument that future markets with enough liquidity will reduce risk and offer hedging insurance against market disruptions, I am rather disappointed that Shiller did not offer an analysis of the argument that derivatives were a part of the "subprime problem." If more financial engineering is in fact a long term solution to financial problems, Shiller should have at least addressed the current negative perception with a sentence or two. I hope that this will be corrected in future editions.
Even though "The Subprime Solution" is not an all encompassing treatise of the current financial crisis, it offers strong insights, readability, and wisdom in a time of uncertainty.
An interesting but uneven treatment of the subprime mess October 15, 2008
1 out of 5 found this review helpful
Robert Shiller, the creator of the Case Shiller Home Price Index, comes to the subprime mess with certified authority and insight. The first three chapters are well written and enlightening. His comments about the long term buildup of the housing boom and its effect on the national psychology of the bubble are on target; he must be taken seriously on the present threat to the social cohesion of the country comparing its rendering to the Great Depression and his comments about the amplification of the bubble by the media will find many believers in this country. His criticism of Alan Greenspan is temperate and gentlemanly in that academic manner. His critique of OFHEO in not doing its job in reigning in Fannie Mae and Freddie Mac flies in the face of OFHEO's bracing 2004 and 2005 reports to Congress. Shiller takes on the easy targets, ignoring the real scoundrels, Chris Dodd and Barney Frank, and its Democratic establishment which ruled Fannie Mae for years. He admits as much in the epilogue; eschewing "finger-pointing;" acknowledging with italicized emphasis that " there have been evildoers." It is just not the Yale way.
 not up to Shiller's standards October 15, 2008
2 out of 8 found this review helpful
Small book, with large type and many spaces.
Out of date given the recent economic crisis.
Not very interesting.
Sub Prime ----too late October 11, 2008
2 out of 7 found this review helpful
Thie book tells the reader what we already know about the sub-prime lending problem..... stupid buyers and greedy lenders. Don't waiste your time reading this one.
Shiller October 10, 2008
1 out of 3 found this review helpful
This book is essentially divided into three parts. (1) How we got here (2) What to do in the short term and (3) What to do in the long term.
I found Shiller's account of how the subprime crisis emerged to be on the money. Shiller co-developed the Kay Shiller index, which measures the real increase in home prices and he point out that, between 1997 and 2006, real home prices (inflation adjusted) increase by 85% (p. 32). This sort of growth is clearly unsustainable and a byproduct of a massive and misguided group psychology event. He likens the subprime contagion to a disease epidemic, slowly creeping up and eventually spiraling out of control.
Shiller argues that a drop in home prices are necessary in order to restore equilibrium to the market. He writes, "the idea that public policy should be aimed at validating the real estate myth, preventing a collapse in home prices from ever happening, is an error of the first magnitude." (p. 85)
After grounding the reader in the nature of the problem, he offers up both short term and long term solutions to the housing crisis. His proposed solutions are left leaning and strike me as theoretically appealing but implausible in practice.
He argues for a Home Owners Loan Corporation, similar to what was seen in the 1930s. The HOLC would buy up toxic mortgages and help to stabilize the markets. He also believes that public infrastructure should help to subsidize financial advise, so that people know what they are getting into a priori. Finally, he proposes a continues workout mortgage, whereby one's payments would go down in the event of an economic downturn.
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