I just finished reading Confessions of a Subprime Lender: An Insider's Tale of Greed, Fraud and Ignornace by Richard Bitner. I got interested in the book via this review this review in an issue of The Wall Street Journal last week. I had recently done a presentation for some students that included a discussion of the role of ethics in economics; and I'll be taking part in another presentation for the same group in a week. For the latter, I thought about talking about ethical failures as they relate to the subprime issue and thought the book might provide some insights. It did.
For the first third and the last ten percent, the book did a good job of putting a face on the subprime market. We get introduced to borrowers, brokers, and lenders that the author dealt with, and he does a good job of selecting his anecdotes to make his point. There is a middle portion of the book that, while less captivating in terms of humanizing the story, provides a thorough examination of how various levels of the "food chain" contributed to failure. From borrowers to brokers, through the Fed and rating agencies, Bitner draws a picture combining ethical lapse with intentional fraud, and colored with unintended consequences or willful neglect. The result is the mess we're in. This section also requires a little more concentration as Bitner explains some of the mechanics of the mortgage market. And while that may sound daunting for people without a background in finance, Bitner does a good job of explaining the basics in an easy-to-understand way.
So how might this help you as an economics and/or personal finance teacher? In both areas, the book is a fine example of how the large macro reflects the decisions and choices made at the micro. At the same time, it offers a fine way to discuss the "everybody did it, why shouldn't I" defense that some young people like to toss back as justification for certain behavior. While Bitner makes it clear that not "everybody did it;" it also is clear that had fewer people gone along with the crowd, the picture would be different.
I look forward to your comments.
(You may also want to look at the review and comments at The Big Picture.)