At the peak of the bust, in 2005, New Century originated nearly $50 billion worth of mortgage loans. Some 30 percent of those loans were so-called "80/20 Combo Product" loans. The 80/20 product was actually two loans piggybacked together, the first for 80 percent of the home's value, and the second for the remaining 20 percent. With an 80/20 loan, the borrower didn't have to put any money down at all.

Great deal for the borrower -- but not so great for the lender or whoever bought the loans from the original lender (whether whole or as part of a securitized pool of loans.)

From the complaint:

New Century's 80/20 product had a high risk of first or early payment default, as the borrower had no equity in the property securing the loan. Without placing any of his or her own money at risk, in the form of a traditional down payment, the borrower could walk away from the loan as soon as market conditions justified such a move, without suffering a loss. As soon the nationwide rise in home prices abated in late 2005 and early 2006, and home prices began to decline, these borrowers were among the first to default on their payment obligations, thereby triggering, in ever increasing numbers, New Century's loan repurchase obligations.

(New Century was obligated to buy back any loans it had sold off to other investors if borrowers defaulted on their payments within a specified period.)

So let's think about this. Who should we blame more for this mess? The borrower who is making a completely rational financial decision to walk away from a busted deal, or the lender who is stupid enough to push such a mortgage product in the first place? And what about the likes of Lehman Brothers and Morgan Stanley, who gobbled up as much of the mortgage-backed security crap created by New Century as they could?

Ideally, abuses such as the brain-dead no money down 80/20 combo loan would be precisely the kind of thing that a Consumer Financial Protection Agency would take a very dim view of. The irony being that it wouldn't be just the consumer that was being protected, but the lender, from its own folly.

Hanna Rosin's Atlantic article exploring the economic consequences of the so-called "prosperity gospel" is no mere blog post, but before reading it, I felt my own hackles rise in preliminary disagreement with the provocative lead-in. No one factor deserves all the blame for something as incredibly complicated as the global economic crash we just lived through. Everyone has their own favorite villain -- the Community Reinvestment Act, Fannie Mae and Freddie Mac, China, the repeal of Glass-Steagal, the Commodity Futures Modernization Act, Goldman Sachs self-dealing, the conflict of interest inherent in how credit rating agencies work, the originate-to-distribute model of mortgage loan securitization, bad computer models, mismatched incentives, Wall Street executive greed, government leadership failure, the list goes on and on. The story of the crash is how all these different factors interlocked, reinforced each other, and blew up.

So sure, evangelical Christian preachers telling the members of their flock that all they have to do is trust in Jesus and they'll be moving, lickety-split, right on up into that McMansion on the hill, played some part in encouraging a blithe American sense of entitlement, a confidence that riches should be our earthly reward just for being born again. But it is by no means the whole story, and in a perverse way lets regulators, Wall Street executives, and economists off the hook while partially blaming the lowest rung of the totem pole, the Jesus-dazzled Americans who took out loans that they couldn't afford, for being the prime movers in creating an economic disaster, when in fact they were just as much victims as perpetrators.

That having been said, Rosin's article is an excellent exploration of the amazing contradiction inherent in how evangelical Christianity in America, to borrow Andrew Sullivan's formulation, "supports wealth while Jesus demanded total poverty." There's a lot of great reporting, particularly regarding the concrete intersections between the mortgage lending industry and the Jesus biz.

Rosin's chief narrative vehicle, Fernando Garay, the pastor of Casa del Padre in Charlottesville, Virginia, didn't just preach the prosperity gospel, he prepared the loan papers too.

From 2001 to 2007, while he was building his church, Garay was also a loan officer at two different mortgage companies. He was hired explicitly to reach out to the city's growing Latino community, and Latinos, as it happened, were disproportionately likely to take out the sort of risky loans that later led to so many foreclosures. To many of his parishioners, Garay was not just a spiritual adviser, but a financial one as well.

The demographic correlation between foreclosure hotspots and the newer "prosperity churches" is also interesting, as is the evidence that lenders executed a conscious strategy of reaching out to churches in order to target low-income, minority populations.

The idea of reaching out to churches took off quickly, Jacobson [a former top loan officer in Wells Fargo's subprime division] recalls. The branch managers figured pastors had a lot of influence with their parishioners and could give the loan officers credibility and new customers. Jacobson remembers a conference call where sales managers discussed the new strategy. The plan was to send officers to guest-speak at church-sponsored "wealth-building seminars" like the ones Bowler attended, and dazzle the participants with the possibility of a new house. They would tell pastors that for every person who took out a mortgage, $350 would be donated to the church, or to a charity of the parishioner's choice. "They wouldn't say, 'Hey, Mr. Minister. We want to give your people a bunch of subprime loans," Jacobson told me. "They would say, 'Your congregants will be homeowners! They will be able to live the American dream!"

Sounds like high time that somebody escorted the money-changers out of the temple again, but that's never really been the American way.

The scourge of unemployment is splitting America into three groups: 1) the third just mentioned, whose households are in danger of losing their homes and whose kids are surviving on food stamps (that's up to one in four children in America today); 2) the vast majority of Americans who are managing but worried about keeping their jobs and homes; and 3) a small number who are taking home even more winnings than they did in the boom year 2007.

Prominent among Category 3 are Wall Street bankers, many of whom are now concluding their most profitable year ever. Goldman Sachs is so flush it's preparing to give out bonuses in a few weeks totaling $17 billion. That will mean eight-figure compensation packages for lots of Goldman executives and traders. JPMorgan Chase is rumored to have a bonus pool of around $5 billion. The three other major Wall Street banks are ratcheting up their compensation packages so their "talent" won't be poached by Goldman or JPMorgan.

Wall Street is booming again in large part because the rest of America -- categories 1 and 2, above -- bailed it out to the tune of $700 billion last year. The Street has repaid some of that but, according to the bailout program's inspector general, much of it is gone forever. For example, the taxpayer money that bailed out giant insurer AIG went directly through AIG to its "counterparties" like Goldman Sachs -- to whom Tim Geithner, according to the inspector general, gave away the store. As Goldman Sachs prepares to dole out some $17 billion to its executives and traders, it's worth noting that Goldman received $13 billion a year ago from the rest of us via AIG and Geithner, no strings attached.

Which brings us back to homeowners who are falling further behind. The $75 billion federal program designed to bribe banks to modify mortgages has been a bust. No one knows the exact number of mortgages that have been modified (that will be reported next month) but housing experts I've talked with say it's a tiny fraction of the number of homeowners in trouble. Seems that the big banks can't be bothered. "Some of the firms ought to be embarrassed," Michael Barr, the assistant Treasury secretary for financial institutions, told the New York Times.

Barr says the government will try to use shame as a corrective, publicly naming institutions that have moved too slowly. But the banks have done almost nothing to date. "We've made dramatic improvements, and we continue to try to get better," says a spokesman for JPMorgan Chase, but as a practical matter JPMorgan has done squat.

Shame? If we've learned anything over the last year, it's that Wall Street has none. Ten months ago Wall Street lobbyists beat back a proposal to give bankruptcy judges the right to amend mortgages in order to pressure lenders to reduce principle owed, just like Wall Street lobbyists are now beating back tough regulations to prevent the Street from causing another meltdown.

Shame? For Wall Street, it all comes down to P.R., at minimal cost. Goldman Sachs, attempting to preempt a firestorm of public outrage when it dispenses its $17 billion of bonuses, is setting up a crudely conceived $500 million P.R. program to help Main Street.

Shame won't work. Only political muscle and courage will. Congress and the Obama administration should give homeowners the right to go to a bankruptcy judge and have their mortgages modified.

And while they're at it, resurrect the Glass-Steagall Act that used to separate investment from commercial banking, so Wall Street can't continue to use other people's money to gamble.

Finally, before Goldman hands out $17 billion in bonuses, claw back the $13 billion Goldman took from AIG and the rest of us and add it to the pool of money going for mortgage relief.

Chiang, whose monthly missives warning of impending bankruptcy have been a staple of California life for the last year, becomes positively ebullient:

October's numbers may contain some signs that California's economy is gradually beginning to heal. Both personal income and corporate taxes beat monthly estimates, while corporate and sales taxes also came in higher than October 2008.

As California goes, so goes the nation? If we're talking budget paralysis and dysfunctional politics, that might not be a good thing. But if we're talking economic recovery, a return to health out West would be a welcome prospect for the entire country.

However, after lulling our fears with his happy talk, Chiang appends a "guest article": "Overview of the Commercial Property and Capital Markets with Implications for the State of California," by Dr. Randall Zisler.

The message from Dr. Zisler is quite different. Nationally, the commercial real estate market is in big, big trouble.

A crisis of unprecedented proportions is approaching. Of the $3 trillion of outstanding mortgage debt, $1.4 trillion is scheduled to mature in four years. We estimate another $500 billion to $750 billion of unscheduled maturities (i.e., defaults). Unfortunately, traditional lenders of consequence are practically out of the market and massive amounts of maturing debt will not easily find refinancing. Marking-to-market outstanding debt will render many banks, especially regional and community banks, insolvent, especially as much of the debt is likely worth about 50 percent of par, or less.

Stated baldly: Banks are on the hook for loans to commercial real estate developers that will never be paid back and can't be refinanced. Zisler doesn't break down the figures to tell us how much of that $3 trillion in outstanding mortgage debt is California's, but one can guess that it is a significant fraction.

California's faltering steps forward, in terms of rising tax revenue for October, could just be the calm before the commercial real estate storm finally hits. Double-dip recession, with a California topping, anyone?

The economic crash and its aftermath are affecting all sectors of the economy, real estate being no exception. Real estate, especially in the transactional sub-sectors (e.g., brokers, etc.), accounts for a significant share of the California labor force. The downturn has created a vicious negative feedback, a symptom of which is still ongoing property deflation and tenant defaults. Attendant symptoms are reduced property tax revenues, failing businesses, decimated transactions volume, and reduced income and sales tax revenues. The extent to which the recovery is delayed will depend on a number of factors, not least of which is the extent and timing of loss recognition by owners and financial institutions.

William D. Cohan's riveting account of the fall of Bear Stearns, "House of Cards: A Tale of Hubris and Wretched Excess on Wall Street" was one of the first books published on the financial crisis to hit the market. It also held pride of place as one of the best, at least until the publication of Andrew Ross Sorkin's "Too Big To Fail." Full of detail from numerous interviews and copious access to company e-mails, Cohan's account is noteworthy not least for the compelling and lengthy circumstantial case that it makes against Cioffi and Tannin. If you were judging from "House of Cards" then Cioffi and Tannin seemed obviously guilty of telling investors in their funds one thing while doing another.

Just one example of how Cohan tells the story;

The problem was that none of it was true. Cioffi had not been avoiding residential mortgage-backed securities, as he had suggested to his investors on their monthly statements. Actually, he had done precisely the opposite and had started to load up on these toxic securities at exactly the wrong moment.

The indictment of both men on charges of conspiracy, securities fraud, and wire fraud is part of the last chapter of "House of Cards." The case against them, from Cohan's telling, seems airtight.

Two months after the publication of "House of Cards," Wall Street Journal reporter Kate Kelly's book on Bear Stearns, "Street Fighters: The Last 72 Hours of Bear Stearns, The Toughest Firm on Wall Street," finally made it to stores. Although Kelly broke some important stories for the Journal on Bear Stearns, "Street Fighters" -- about half as long as "House of Cards" and much less comprehensive -- suffered in comparison. The saga of Cioffi and Tannin only occupied two pages near the beginning of her story, and the fact that they had been indicted for securities fraud in federal court wasn't even mentioned, a point I noted with several exclamation points written in the margins of my reviewer's copy.

At the time, I thought this was a pretty serious flaw in "Street Fighters." But now, after seeing Cioffi and Tannin acquitted in a court of law, I wonder. Maybe it was Cohan who gave their misadventures too much attention, while Kelly got it just right.