Other People’s Money: Inside the Housing Crisis and the Demise of the Greatest Real Estate Deal Ever Made by Charles V. Bagli

The 2019 novel Other People’s Money: Inside the Housing Crisis and the Demise of the Greatest Real Estate Deal Ever Made, by Charles V. Bagli, examines how the housing bubble burst and how the industry struggles to recover in the present day. The book delves into the initial build-up of the housing boom, the eventual collapse, and its lasting effect on those involved in the transaction. It examines the myriad of people involved in the transaction, from the developers to the financiers, and the implications of the eventual fallout on everyone.

In summary, Other People’s Money looks closely at one particular real estate transaction from the time of the housing bubble, the purchase of the magnificent, iconic Starrett-Lehigh Building and its subsequent conversion from a warehouse space into office and retail. The transaction was between Ironstone Group and developer Andrew J. Farkas, with the majority of money coming from institutional investors, such as Lehman Brothers, Citicorp, and AIG. Bagli examines the behind the scenes details of the deal, including the lenders and financiers, the various stakeholders and players in the transaction, and the players’ motivations and thought processes that ultimately led to a lackluster outcome.

Bagli showcases how the development project’s promise of profits, growth, and success were simply too great to ignore. He outlines how Farkas was seduced by the promise of enormous profits, despite the warnings of caution. This theme continues with the details of the financing of the deal, the various advisors to Farkas, and the condition of the building itself. Ultimately, the deal collapsed and Farkas himself wound up in bankruptcy. The fallout in the industry was catastrophic, with financial institutions bearing the brunt of the losses.

Throughout Other People’s Money, Bagli takes a critical look at the culture of risk-taking and finance that contributed to the collapse of the housing boom. He sees the transformation of the Starrett-Lehigh Building as a symbol for what the industry had become – a tremendous gamble that ultimately could not sustain itself. He does not hesitate to point out the greed, negligence, laziness and recklessness that was pervasive in the industry at this time and in the events leading up to the deal.

Ultimately, Bagli examines how the Starrett-Lehigh deal was seen as a risk worth taking, until it wasn’t. He points out how the industry failed to recognize its own vulnerability, and how its recklessness put it in a position where it simply could not withstand such a catastrophic event. Consequently, Bagli offers a sobering look at the events leading up to the housing crisis, and how the industry’s enthusiasm ultimately proved to be its downfall.

Other People’s Money offers an in-depth and thought-provoking look at the events leading up to the housing bubble burst. From the developers and financiers to the institutional investors and the lure of immense profits, Bagli’s analysis of this iconic real estate deal reveals the mistakes, negligence and recklessness that ultimately contributed to such a massive industry disaster. The book is a worthwhile read for anyone interested in the inner workings of the housing industry, the effects of risk-taking, and the lessons to be learned from one of the greatest real estate deals of all time.