Mortgage mess is covered inside out

"Why did you do it?" Alan Greenspan wanted to know. Of all people, Edmund Andrews should have known. An economics reporter with the New York Times, Andrews wrote about the "go-go mortgages" in the overheating housing market. Why would he then get one of his own?

In "Busted: Life Inside the Great Mortgage Meltdown," he explains why. His account of what happened to him in particular and to the country in general is a fascinating forensic read.

Like Greenspan, the esteemed chairman of the Federal Reserve, Andrews saw home values rising but could not see the bubble about to burst. Like other consumers, he wanted to buy what he could not afford. Like others, he is paying dearly for his miscalculations.

Andrews retraces his steps back to Bob the mortgage broker, who helped him borrow nearly half a million dollars to buy a house despite his enormous child support and alimony payments. We meet Michael Strauss, the subprime lender who gave him his "liar's loan" and launched the treacherous "Power ARM." We see mainline investment firms stoking the subprime furnace. We watch Merrill Lynch trading its future for credit default swaps and "collateralized debt obligations."

In this topsy-turvy world, once-reliable Wall Street firms clamored for junk loans. Moody's gave high-risk securities the same AAA rating it gave U.S. Treasury bills. The ironically named federal Office of Thrift Supervision declared "liars loans" unsafe -- but permissible if they were sold off to outside investors.

It was just crazy enough to work, they all thought. Well, not all. Bill Ackman, the hedge fund manager who recently tried to muscle onto Target Corporation's board of directors, smelled a rat. In a 2007 speech that he titled "Who's Holding the Bag?" he warned that this roulette game of passing the risk was setting up an epic meltdown.

You know the rest. Borrowers defaulted, investors panicked and the housing bubble burst.

More recently it was Andrews' turn to squirm when a blogger for the Atlantic magazine reported that the book did not mention that his wife had declared bankruptcy twice. He probably should have known that such a compelling tale about his personal finances would invite more scrutiny of his personal finances.

While Andrews should have told all as long as he was telling this much, his book remains a riveting deconstruction of the mess we're now in.