2.  Housing boom led banks to lend to areas with the highest rates of income growth  Feeding the boom, banks lent to builders, decorators, stores.  Banks borrowed to make more loans so consumers could borrow more.

3.  The housing bubble bursts.  Some regions are so burdened with debt that rebounding spending is unlikely.  States such as California, Nevada, Florida, Arizona wound up with large proportions of negative equity and high unemployment rates  Loss of equity hit small business hard.  Consumers retrench due to lack of credit.

4.  Other states had never been targeted by the banks.  In the flyover states, the housing boom was much more mild.  Banks were not pushing credit in these states, so households didn’t overextend.  With a mild boom, these states experienced a mild bust.  Manufacturing jobs starting to return to these areas.

5.  State governments in the flyover areas have not piled on lots of debt.  Thus there was no need to raise taxes; they had the funds to invest in infrastructure and job training.  Since 2008, the flyover states have experienced less unemployment and higher income growth than the housing boom states.

6.  Housing boom states greatly cut spending for education and infrastructure and piled on debt.  As a result, high-earners have migrated out of the housing boom states.  Like banks, state and local governments made bets that housing prices would never fall.  Governments underestimated the crash, using debt to make ends meet.

7.  Some states also piled on pension obligations and retirement costs that will eventually have to be paid.

8.  Two groups of states: ◦ 1) Over leveraged and slow growing ◦ 2) Growing because they did not borrow and spend during the housing boom  The U.S. is divided into growing states and states with very high unemployment rates.  Pro-business states with healthy balance sheets and low costs are growing faster than others.

9.  Book addresses the boom and bust, and examines what can be done to reduce the gap between the have and have not states.