From the Back Cover
“This is an engaging, nontechnical, accessible, and cogent set of analyses for fixing the housing market. The authors provide an elegant, compelling, insightful, and timeless evaluation of how to resolve the current housing crisis.”
--Professor Robert Edelstein, Maurice Mann Real Estate Chairholder and Co-Chair Fisher Center for Real Estate and Urban Economics, Haas School of Business, University of California at Berkeley
“The authors suggest both frameworks and financial tools necessary to fix the troubled markets. The book is clearly and concisely written and useful to all those seeking an integrative and thoughtful assessment of where we go from here.”
--Stuart A. Gabriel, Professor of Finance and Arden Realty Chair, UCLA Anderson School of Management
“You will not find a more timely and relevant book, and from a team of authors with great expertise ranging from the academic frontier of the study of bubbles to the practical reform of our housing finance system. We really need this clear analysis to help us better understand what often is portrayed as an overly complex topic.”
--Joe Gyourko, Martin Bucksbaum Professor of Real Estate, Finance and Business & Public Policy, The Wharton School, University of Pennsylvania
“The authors remind us that the current housing finance crisis is not singular, but part and parcel of the long-term coevolution of finance and housing markets. While readers might not agree with all of the conclusions drawn by the authors, the volume of content, which is presented quite accessibly, allows for the formation of the readers’ own conclusions.”
--George McCarthy, Ph.D., Director, Metropolitan Opportunity, The Ford Foundation, New York, NY
“In this insightful and important book, three of the nation’s leading experts on financial innovation explain how future innovations can continue to finance home ownership without taxpayers being so heavily on the hook for mistakes as they have been as a consequence of the crisis.”
--Robert E. Litan, Vice President for Research and Policy, Kauffman Foundation, and Senior Fellow, Economic Studies, The Brookings Institution
“You can’t understand the future of the U.S. housing market without an appreciation of its history, as well as housing markets in other countries. This book provides this valuable context, followed by innovative solutions informed by careful analyses of public policies, business practices, and consumer behavior.”
--Professor Peter Tufano, Peter Moores Dean, University of Oxford, Saïd Business School
Since the ancient Greeks, financial innovation has enabled more people to own homes. Today, responsible financial innovation is the best tool available for rebooting crippled housing markets, improving their efficiency, and making housing more accessible. In this book, three leading experts explain why and cover everything decision-makers should know about housing finance.
The authors first clarify how housing financial products, services, and institutions evolved through the past two centuries, culminating in the era of securitization and the “mortgage meltdown.” Next, they assess housing finance systems in today’s mature economies, highlighting benefits and risks associated with each leading mortgage funding structure and product. They also assess housing finance in emerging economies such as Brazil, Russia, India, and China.
Building on these insights, the authors identify important financial innovations that can facilitate a more stable and sustainable financing system for housing--providing better shelter for more people, helping the industry recover, and creating thousands of new jobs.
A history of financial innovation in housing
From “mortgage stones” to mortgage-backed securities, and beyond
What went wrong?
Why housing markets really failed: learning the right lessons
Promoting more robust, stable, and sustainable housing markets
Implementing productive solutions, avoiding counterproductive policies
Delivering the right products via the right delivery modes
Crafting the right financial structures for new construction, access, and retrofitting
This volume is part of a series of books on financial innovation, published through a collaboration between Wharton School Publishing and The Milken Institute. Future volumes will focus on other frontiers of financial innovation, including such critical topics as healthcare, energy, and environmental finance.
About the Author
Franklin Allen is the Nippon Life Professor of Finance and Professor of Economics at the Wharton School of the University of Pennsylvania, where he has been on the faculty since 1980. A current codirector of the Wharton Financial Institutions Center, he was formerly vice dean and director of Wharton Doctoral Programs as well as executive editor of the Review of Financial Studies, one of the nation’s leading academic finance journals. Allen is a past president of the American Finance Association, the Western Finance Association, the Society for Financial Studies, and the Financial Intermediation Research Society. His main areas of interest are corporate finance, asset pricing, financial innovation, comparative financial systems, and financial crises. He is a coauthor, with Richard Brealey and Stewart Myers, of the eighth through tenth editions of the textbook Principles of Corporate Finance. In addition, he is coauthor, with Glenn Yago, of Financing the Future: Market-Based Innovations for Growth. Allen received his doctorate from Oxford University.
James R. Barth is the Lowder Eminent Scholar in Finance at Auburn University and a Senior Finance Fellow at the Milken Institute. His research focuses on financial institutions and capital markets, both domestic and global, with special emphasis on regulatory issues. He has served as leader of an international team advising the People’s Bank of China on banking reform and traveled to China, India, Russia, and Egypt to lecture on various financial topics for the U.S. State Department. He was interviewed about the financial crisis of 2007 to 2009 by the Financial Crisis Inquiry Commission and the Congressional Oversight Panel. An appointee of Presidents Ronald Reagan and George H. W. Bush, Barth was chief economist of the Office of Thrift Supervision and previously the Federal Home Loan Bank Board. He has also held the positions of professor of economics at George Washington University, associate director of the economics program at the National Science Foundation, and Shaw Foundation Professor of Banking and Finance at Nanyang Technological University. He has been a visiting scholar at the U.S. Congressional Budget Office, Federal Reserve Bank of Atlanta, Office of the Comptroller of the Currency, and the World Bank. Barth has testified before the U.S. House and Senate banking committees on several occasions. He has authored more than 200 articles in professional journals and has written and edited several books, including The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Meltdown; Rethinking Bank Regulation: Till Angels Govern; Financial Restructuring and Reform in Post-WTO China; China’s Emerging Markets: Challenges and Opportunities; The Great Savings and Loan Debacle; and The Reform of Federal Deposit Insurance. His most recent book is Guardians of Finance: Making Regulators Work for Us. Barth is the coeditor of The Journal of Financial Economic Policy and overseas associate editor of The Chinese Banker. He has been quoted in news publications ranging from The New York Times, The Financial Times, and The Wall Street Journal to Time and Newsweek. In addition, he has appeared on such broadcast programs as Newshour, Good Morning America, Moneyline, Bloomberg News, Fox Business News, and National Public Radio. Barth is also included in Who’s Who in Economics: A Biographical Dictionary of Major Economists, 1700 to 1995.
Glenn Yago is Senior Fellow/Senior Director at the Milken Institute and its Israel Center. He is also a visiting professor at Hebrew University of Jerusalem where he directs the Koret–Milken Institute Fellows program. Yago is Founder of the Institute’s Financial Innovations Labs®, which focus on the innovative use of finance to solve long-standing economic development, social, and environmental challenges. His financial research and demonstration projects have contributed to policy innovations fostering the democratization of capital to traditionally underserved markets and entrepreneurs in the United States and around the world. Yago is the coauthor of several books, including The Rise and Fall of the U. S. Mortgage and Credit Markets; Global Edge; Restructuring Regulation and Financial Institutions; and Beyond Junk Bonds. In addition, he is coauthor, with Franklin Allen, of Financing the Future: Market-Based Innovations for Growth. He was formerly a professor at the State University of New York at Stony Brook and at the City University of New York Graduate Center’s Ph.D. Program in Economics. Yago earned his Ph.D. at the University of Wisconsin, Madison.
A nonprofit, nonpartisan think tank, the Milken Institute believes in the power of capital markets to solve urgent social and economic challenges. Its mission is to improve lives around the world by advancing innovative economic and policy solutions that create jobs, widen access to capital, and enhance health.