Reckless Endangerment or Washington and Wall Street: The Revolving Door

The authors, Gretchen Morgenson, a Pulitzer Prize-winning business reporter and columnist at The New York Times, and Joshua Rosner, an expert on housing finance, deftly trace the beginnings of the collapse to the mid-1990s, when the Clinton administration called for a partnership between the private sector and Fannie and Freddie to encourage home buying.

The mortgage agencies’ government backing was, in effect, a valuable subsidy, which was used by Fannie’s C.E.O., James A. Johnson, to increase home ownership while enriching himself and other executives. A 1996 study by the Congressional Budget Office found that Fannie pocketed about a third of the subsidy rather than passing it on to homeowners. Over his nine years heading Fannie, Johnson personally took home roughly $100 million. His successor, Franklin D. Raines, was treated no less lavishly.


To entrench Fannie’s privileged position, Morgenson and Rosner write, Johnson and Raines channeled some of the profits to members of Congress — contributing to campaigns and handing out patronage positions to relatives and former staff members. Fannie paid academics to do research showing the benefits of its activities and playing down the risks, and shrewdly organized bankers, real estate brokers and housing advocacy groups to lobby on its behalf.

Essentially, taxpayers were unknowingly handing Fannie billions of dollars a year to finance a campaign of self-promotion and self-*protection. Morgenson and Rosner offer telling details, as when they describe how Lawrence Summers, then a deputy Treasury secretary, buried a department report recommending that Fannie and Freddie be privatized. A few years later, according to Morgenson and Rosner, Fannie hired Kenneth Starr, the former solicitor general and Whitewater investigator, who intimidated a member of Congress who had the temerity to ask how much the company was paying its top executives.

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This book gives us insight to how everyone out of the loop got used and taken advantage of. This book now only is looking at the tip of the ice berg as to the financial meltdown of the 2008 market crash. If Joe wants the truth about how the taxpayer s got screwed and used this should clearly show him how wrong he has been about things he has been telling everyone. After listening to these authors, Gretchen Morgenson, a Pulitzer Prize-winning business reporter and columnist at The New York Times, and Joshua Rosner, an expert on housing finance, one really feels the anger of the taxpayers and people in general about the manipulation of the entire financial community by leechs, thieves and robbers.

 

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I assume you are referring to her book, "Reckless Endangerment". I think you are confusing some issues. The issues related to Fannie Mae were not the cause of the Financial Crisis of 2008. The issues related to Fannie Mae preceded the crisis and were independent of the crisis.

Fannie was an agency of the Federal government until it was spun off and operated as a private company. Was it poorly managed? Yes. Did it spend money on Washington to get favorable treatment? Yes, just like every other company and special interest wanting something from government (e.g. healthcare industry). Was it poorly regulated? Absolutely, but the solution was not further deregulation as advocated by Republicans. Were there accounting problems at Fannie Mae? Yes.

I think you are a little confused because I have never said anything other than what I just said. But Fannie Mae was not the cause of the Financial Crisis of 2008. This blame everything on Fannie Mae is a canard.

I find it kind of funny that the people who complain about President Obama limiting bank executive pay while receiving TARP money complain in the next breath about the pay for other executives (e.g. Fannie Mae).

 

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This is the CBO report that they reference.

http://www.cbo.gov/doc.cfm?index=13&type=0&sequence=1

 

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