Yale Professor William Goetzmann draws a parallel between the commercial mortgage-backed securities of recent years, and a real estate bond boom in the 1920s. A boom he argues led to the stock market crash of 1929.
“By nearly every measure,” he and his co-author notes, “real estate securities were as toxic in the 1930s as they are now.”
In an interesting paper from the National Bureau of Economic Research, he and Frank Newman, a former research assistant at the Yale School of Management, dig into the bonds that financed the greatest boom in the building of skyscrapers ever. In 1925, 23% of all corporate debt were these bonds. Nine years later, the entire class of investments had nearly vanished. Continue reading