In the early years of the housing bust as we sought policies to address the foreclosure crisis, both economists and politicians—including Robert Shiller, Alan Blinder, Barack Obama, and Hillary Clinton—proposed policy responses modeled on the Depression-era Home Owners' Loan Corporation (HOLC). The HOLC was a response to the foreclosure crisis of the 1930s and had been widely seen as a success. Well Worth Saving, by three leading scholars of historical housing and mortgage markets, is a study of the crisis in housing and mortgage markets in the 1930s and the HOLC's response. It is a fine work in its own right and an excellent example of the usefulness of economic history to current economic policy discussions. It assesses the benefits and costs of the HOLC and provides a thoughtful assessment of what lessons we might take from it, including a careful elucidation of the differences between the modern crisis and that of the 1930s.

The book begins with a concise summary of nonfarm mortgage lending in the 1920s and the crisis in housing markets in the late 1920s and early 1930s. It is particularly helpful in highlighting how the features of common types of loans differed from the modern mortgage contract, and how these features influenced the subsequent crisis and the government's response. Especially by modern standards, loan-to-value ratios were quite conservative, usually on the order of 60 percent for first loans. Yet as unemployment rose and house values fell, the structure of mortgage contracts exacerbated the crisis in housing markets. As an example, one common type of mortgage was a short-term (3 to 5 year) balloon loan, which required only interest payments until the full principal amount came due at the end. Normally borrowers would refinance at this point, but as credit markets seized up in the 1930s many borrowers could not find financing to do so and fell into default.

The middle chapters of the book provide an overview of how the HOLC responded to the crisis. A relatively well-known function of the HOLC was mortgage modification, moving borrowers to long-term, fully-amortized, high loan-to-value loans more similar to the typical modern mortgage contract. The authors also emphasize the HOLC's function as a “bad bank,” acquiring bad loans from lenders, funding them with long-term obligations, and servicing them patiently. In doing so, the HOLC provided badly needed liquidity to the mortgage market. There is also a useful, clearly argued discussion of the economic rationale for government intervention of the type provided by the HOLC. An important point here is that the government guarantee of, initially, the interest and, later, both interest and principal on HOLC bonds was important to the financial success of the program: borrowing more cheaply allowed the HOLC to incur a smaller loss, and some of the subsidy was likely passed along to borrowers through lower interest rates.

The last third of the book provides analysis of what benefits the HOLC had for lenders, borrowers, and housing markets. The HOLC secured high levels of participation—it reached one out of every five nonfarm mortgage borrowers, in part by offering lenders generous terms. Principal reductions, at least for first lien holders, were generally quite small: in a sample of renegotiated loans, first lien holders on average received back 96 percent of what they were owed. Although a relatively small amount of borrowers' debt was forgiven, borrowers received other direct benefits from participating in the program. With its bonds guaranteed by the government, the HOLC could charge its borrowers relatively low interest rates. The HOLC was a lenient servicer, and sometimes helped its borrowers find new employment. The restructuring of their debt also benefitted borrowers by aligning their obligations with their employment prospects (notably, borrowers had the option of paying only interest until June 1936). Corresponding evidence at the level of housing markets confirms that the HOLC was effective in providing relief: HOLC intervention alleviated declines in home ownership and housing values, at least in relatively small communities.

The penultimate chapter discusses the costs of the HOLC. The HOLC received $200 million in starting capital from the U.S. Treasury in 1933 and paid back $214 million in 1952. Claims appeared at the time that the HOLC had not only delivered great benefits to housing markets, but that the government had in fact made a profit. In the wake of the recent housing crisis, many proponents of a reincarnated HOLC repeated this claim. However, accounting for inflation would suggest that the government incurred a loss. Nevertheless, using a more complete assessment of the costs of the HOLC, the authors show that the losses incurred by taxpayers from the HOLC were quite modest, and almost certainly justified by its benefits. It is worth noting that a key element in the financial success of the HOLC was the rapid recovery of incomes and house prices in the wartime economic expansion. From the perspective of current policy, it would be interesting to know how the financial health of the HOLC might have fared in an economic expansion that did not include the extraordinary influences of wartime mobilization on housing markets.

Well Worth Saving is an excellent book, well-written and clearly argued. It strikes a perfect balance between being relatively short and being thorough in the treatment of its central questions and should be of great interest to policymakers. For researchers who are not familiar with the authors' other published research on pre-World War II mortgage markets or the HOLC, this book is a concise and very readable introduction. For researchers who are already familiar with their work, this book provides background that will make it a useful reference. It would also fit naturally in either an undergraduate or a graduate economic history syllabus. All in all, Well Worth Saving is a book that is well worth reading.