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A Bronx boom-and-bust story shows why the nation hasn’t yet recovered from the financial crisis.

As the American economy limps through its second “recovery summer,” hobbled by trillions of dollars in bubble-era debt, politicians and regulators should take a long look at an unlikely place: Kingsbridge, a neighborhood in the northwest Bronx. In some ways, Kingsbridge’s credit-bubble experience was no different from the rest of the nation’s. As the bubble reached its greatest size in late 2006 and early 2007, the financial system—aided by dizzyingly intricate instruments and coddled by the government, which had long kept investors from facing the consequences of bad decisions—piled too much debt on Kingsbridge’s modest dwellings. As a result, the buildings’ owner abandoned them, leaving tenants to bear the brunt of somebody else’s mistakes.

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