MoneyMatters101.com Home
Recommended Books

Nolo's Guide to SSI Disability
On America's Roads
On My Own
Our Baby Boomer Years
Points Of Power
Pre-Foreclosure Handbook
Project Management
Pulling Weeds
Put Your Money
Quick And Nimble
Read Health Books
Rescuing America
Retire Inspired
Retire Richer And Faster
Rich Brother, Rich Sister
Rich Dad, Poor Dad
Rich Like Them
Right On The Money
Rules Of Engagement
Sales 2.0
Saving Your Financial Soul
See Jane Lead
Self Made
Selling In Tough Times
Sell Your Home
Six Pixels Of Separation
Small Business Survival Guide
Social Security: Inside Story
Social Security Strategies
Spank The Bank
Spent: Shopping Addict
Starting Over
Stop Sabotaging Your Career
Strategic Alignment
Surviving ObamaCare
Taking Down The Lion
Talking Money
Test-Drive Your Dream Job
The 11 Laws Of Likability
The Age Of Speed
The American Journey of Barack Obama
The Art And Science Of Technical Analysis
The Audacity Of Help
The Best Comes Last
The Business Of Family
The Board Game
The Confidence Code
The Confident Woman
The Cul-De-Sac Syndrome
The Debt-Free Diet
The DNA of Leadership
The Facts Of Business Life
The Gender Impact of Social Security Reform
The Gold Standard
The Human Factor
The Law of Forgiveness
The Lean Entrepreneur
The Intelligent Portfolio
The Investor's Paradox
The Journey: A Celebration
The Millionaire Master Plan
The Money Class
The Moneymakers
The New Color of Success
The New Tycoons
The One Hour Business Plan
The One Minute Closer
The Richest Man In Town
The Safe Investor
The Slight Edge
The Start Up Of You
The Super Stress Solution
The Third Wave
The Total Money Makeover
The Truth About Your Future
The Ultimate Plan
The Wallstrip Edge
The Women's Small Business Start-Up Kit
There's No Such Thing
Think Big
Thinking For A Change
Think Like A Champion
Top Dog
Top Ten Distinctions
Twitter Power
Wealth for Women
What Could Happen?
When Habits Aren't Enough
When Life Strikes
When Turtles Fly
Where Does The Money Go?
Where To Put Your Money
Who Owns The Data?
Who Owns The World?
Who Turned Out The Lights?
Why America Is Sick
Why Didn't They Teach Me
Why Do People Buy Things
Winning Nice
Working With You
You, Inc.
Your Income Tax 2013

More Recommended Books

Email Us

Books As Gifts
Book Contest Winners
Previous Book Contest


If you would like your book to appear on our website, please send a review copy and an electronic excerpt from the book.

Send the review copy to:
26880 Sugarite Canyon Drive
Rancho Belago, CA 92555

Send the Electronic Excerpt to: jroberts@moneymatters101.com


The Cul-De-Sac Syndrome
Turning Around the Unsustainable American Dream
by John F. Wasik

The Unattainable Home

Even before the home bubble burst, homes cost too much for more than four out of ten Americans. Only 56 percent of Americans could afford a modestly priced home in 2002, the first full year of the bubble. And as Americans went deeper into debt to finance their dream, they accumulated less and less of a tangible ownership stake. Home equity as a percentage of market value peaked in 1982 -- at 70 percent -- after a brutal recession. More than half of American homeowners with a mortgage would owe more than they owned at the end of 2008. About 7.5 million were spending more than half of their income on housing costs.

The craving for upward mobility through home ownership escalated even as families on the edge of "making it" were falling behind economically. The think tank Demos said that 23 million families became "economically insecure" from 2000 to 2006, while 4 million experienced economic decline. This erosion in prosperity was triggered by a 22 percent decline in financial assets (following the dot-com bust), loss of health benefits, and an overall rise in the cost of homeownership (up 9 percent during that period). The reaction to this backsliding -- buying a home as an investment -- was the equivalent of a couple on the verge of divorce deciding to have a child in hopes that it would save their marriage. For more than 3 million in or facing foreclosure in 2009, this thinking proved financially catastrophic.

The housing bust represents a profound loss of wealth since few households had significant savings outside of their homes, as values dropped to a median $200,000 in early 2009 from $221,900 at the height of the bubble in 2006. In California, always on the fault line between profound innovation and multiple disasters, the boom and bust was a tragic manic-depressive episode. The median home price in Southern California alone slid to $285,000 by the end of 2008, 44 percent below the peak of $505,000 in 2007. Although the decline allowed more people to afford homes, even during the bust only one-fifth of Los Angeles residents could afford the median-priced home -- up from 2 percent during the boom.

The Bust's Fallout

The housing bust created a firestorm of collateral damage.

  • Lehman Brothers, one of the oldest and most venerable investment banks, was forced into bankruptcy and liquidation during a run on its assets in the late summer and fall of 2008. Its subprime mortgage and credit default swap holdings were essentially to blame, creating the largest business bankruptcy in U.S. history. Its demise released a tsunami of securities- and derivatives-related demons. Basically, when home prices collapsed, the value of the securities holding mortgages also went south. These "toxic assets" imperiled any institution that held them.
  • When the run commenced on Lehman, it drove Merrill Lynch, the country's largest brokerage house, into the arms of Bank of America, creating the world's largest brokerage with more than $2.5 trillion in assets and 20,000 "financial advisers." Merrill, whose symbol was an optimistic though ferocious black bull, had also invested billions in tainted subprime securities. Government regulators also forced the sale of Bear Stearns Companies, another major mortgage securities player, to JPMorgan Chase for a bargain-basement sale price of $10 a share (the initial price was $2 a share). Like Lehman, Bear effectively evaporated.
  • The U.S. government seized Freddie Mac and Fannie Mae, the two largest mortgage issuers and guarantors, and promised to infuse the companies with cash to keep them afloat. Their liabilities vastly exceeded their assets and they were losing a total $50 billion in the third quarter of 2008 alone. Since they insured, loaned, or sold securities representing $5 trillion -- about half of the U.S. mortgage market -- they were deemed "too big to fail."
  • Caught in the opaque business of insuring mortgage securities through the shadowy and then-unregulated world of credit default insurance, the government effectively took over AIG, the world's largest insurer. The Federal Reserve lent it more than $80 billion
    by early 2009, part of a $150 billion bailout. It, too, was deemed too large to go bust, because its mortgage and derivatives positions threatened the global financial system.
  • Seeking refuge in the regulated banking system, the remaining Wall Street investment banks morphed into old-fashioned, deposit-oriented banks. Goldman Sachs and Morgan Stanley applied to become regulated banking companies with federal oversight. American Express followed later in the year. The Age of Froth was truly over as the cowboy operations that thrived on 30-to-1 (and higher) leverage became history.
  • The mother of all bailouts came as wintry storms arrived with an Old Testament vengeance in the autumn of 2008. With rancorous and reluctant Congressional approval, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke on October 1 ushered through a sketchy $700 billion bailout package called the Troubled Asset Relief Program (TARP), which would pump money into banks, possibly buy bad mortgages, and prop up the financial system for a short time. This massive cash transfusion was designed to prevent credit markets from shutting down and avert a global depression. Meanwhile, the Fed was lending some $2 trillion to banks, attempting to break a credit freeze that threatened to shut down all institutional lending. Paulson later backtracked on his earlier proposal to buy mortgages, triggering even more concerns that his master plan was ill conceived and ineptly managed. Sensing that the real purpose of all of the bailout measures was to stem the foreclosure crisis, the Federal Deposit Insurance Corporation announced its own mortgage bailout plan on the heels of the Paulson announcement. Several large banks said they would do voluntary loan modifications to reduce the cost of adjustable-rate loans, although they were under no legal obligation to do so.
  • After more dithering over how TARP funds would be allocated, Secretary Paulson and Fed Chairman Bernanke moved to prop up Citigroup, one of the largest global lenders, with a $20 billion cash infusion and guarantee of more than $300 billion of its loans. Within days, responding to criticism that banks were the exclusive benefactors of the government's bailout, the Fed moved to guarantee certain mortgage, credit-card, and student-loan securities.

An incisive look at the consequences of today's costly and damaging suburban lifestyle.

Wasik's observations are firmly grounded in exclusive on-the-ground research, interviews with thought leaders, and the latest studies and statistics. He exposes the untold truths about home ownership: “green” isn't always so “green”; life isn't cheaper after accounting for gas, water, and taxes; and modern suburban living isn't so idyllic considering the toll it takes on our health. But some are attempting to revive suburbia, and Wasik shows us how.

The roots of the worst housing bust in generations lie in the mythology of the American dream: buy as much house as possible, move away from urban centers, home prices will always go up, the schools there are “better.” The foundation of the dream itself is faulty; indeed, the desire that “every man have his castle” is bankrupting us.

Today's crisis in home values is the least of suburbia's problems. The Cul-de-Sac Syndrome details the destructive connections between home ownership, economics, and the environment. John Wasik provides powerful insights into how the U.S. suburban lifestyle became unsustainable and what can be done to salvage it.


Book of the Month

Book about investing

Advertise on MoneyMatters101.com



Accessibility Policy| Terms Of Use| Privacy Policy| Advertise with Us| Contact Us

Use of this web site constitutes acceptance of the Terms of Use.

We are looking to create more mutually beneficial partnerships. If you are interested in partnering with MoneyMatters101.com, send us your proposal.


Link to MoneyMatters101.com