The world of political commentary (at least that part of it not campaigning for Obama’s re-election) is abuzz with excitement over a trailblazing new book that shows vividly and convincingly what happened to cause the terrible financial crisis that’s gripped the country since 2008 and—most important—who’s responsible.
The book, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon, was written by Gretchen Morgenson and Joshua Rosner. Morgenson is assistant business and financial editor and a columnist at the New York Times (yes, the newspaper with the Democratic bias) and an author of books on financial topics. She had been an investigative business writer and for more than two years worked as a stockbroker. She won the Pulitzer Prize in 2002 for her “trenchant and incisive” coverage of Wall Street. Rosner is Managing Director at an independent research consultancy. He advises regulators and institutional investors on housing and mortgage finance issues and was among the first analysts to identify problems that would lead to the financial crisis.
“’Reckless Endangerment’ utterly deflates the history of the 2008 crash,” said Mona Charen in a review of the book. Charen is a conservative syndicated columnist, author, and former speechwriter for Nancy Reagan and Jack Kemp.
According to a review by political commentator Walter Russell Mead (a Democrat who voted for Obama), the book is “gripping reading…and its explanations are clear enough that readers without any background in finance will have no trouble following the plot.”
And noted conservative pundit George Will said in a review, “The calamity has lacked human faces. No more.”
Mead wrote in his review, “The Great Villain, the man who almost ruined America according to the book, is James Johnson, long one of the most important members of the Democratic establishment.” From 1991 to 1998, Johnson, a prominent Wall Streeter, served as chairman and chief executive officer of the Federal National Mortgage Association (Fannie Mae), the quasi-public organization that guarantees mortgages for millions of American homeowners. He’s a major Obama contributor, fund raiser, and helper.
As Mead explained:
Johnson decided to make untold wealth by making and securitizing junk housing loans and by massaging the financial reports to ensure that he qualified for the obscenely generous maximum bonus no matter what was actually happening to the company under his care. Regulators were captured by the interests they were supposed to regulate; favors were dispensed with a lavish hand; taxpayer-provided money was used to assemble a vast lobby focused on extracting more money from hapless taxpayers to make James Johnson even richer…. (Yet) anybody who opposed Jim Johnson’s get rich scheme was a racist who hated the poor.
Charen quoted from the book: “A Pied Piper of the financial sector, Johnson led both the private and public sectors down a path that led directly to the credit crisis of 2008.”
Will suggested that the book might have been titled “How James Johnson and Others (Mostly Democrats) Made the Great Recession.” He wrote:
Morgenson and Rosner report that in 1998…(Fannie Mae’s) top officials began manipulating the company’s results to generate bonuses for themselves….In nine years, Johnson received $100 million….Fannie Mae’s political machine dispensed campaign contributions, gave jobs to friends and relatives of legislators, hired armies of lobbyists (even paying lobbyists not to lobby against it), paid academics who wrote papers validating the homeownership mania, and spread ‘charitable’ contributions to housing advocates across the congressional map….Although Johnson left Fannie Mae years before his handiwork helped produce the 2008 bonfire of wealth, he may be more responsible for the debacle and its still-mounting devastations — of families, endowments, etc. — than any other individual. If so, he may be more culpable for the peacetime destruction of more wealth than any individual in history.
But Johnson wasn’t the only villain, Mead said. He had important henchmen who constituted “(a)n unholy alliance.” His cronies included:
Wall Street, the Democratic establishment, community organizing groups like ACORN and La Raza, and politicians like Barney Frank, Nancy Pelosi and Henry Cisneros. (Frank got a cushy job for a lover, Pelosi got a job and layoff protection for a son, Cisneros apparently got a license to mint money bilking Mexican-Americans of their life savings in cheesy housing developments.).
And, Mead added, they subjected “honest whistle blowers…to savage personal attacks.”
(T)he greatest responsibility for the collapse of the housing market and the near ‘Armageddon’ of the American economy belongs to Fannie Mae and Freddie Mac and to the politicians who created and protected them. With a couple of prominent exceptions, the politicians were Democrats claiming to do good for the poor. Along the way, they enriched themselves and their friends, stuffed their campaign coffers, and resisted all attempts to enforce market discipline… (I)t was government distortion of markets–not unregulated capitalism–that led the economy to disaster.
According to Will, “‘Reckless Endangerment’ is a study of contemporary Washington, where showing ‘compassion’ with other people’s money pays off in the currency of political power and currency.”
What is especially shocking in this story is that the higher up and more powerful people are usually the most venal and corrupt. Low level researchers and bureaucrats are constantly raising questions and preparing devastating reports that expose the flawed premises behind Fannie Mae’s policies. They are being constantly slapped down by the well connected and the well paid.
Mead elaborated on the book’s discussion of Wall Street:
It links the Democrats to Wall Street — the one part of the private sector that the Republican base loathes….Socially and culturally, most of Wall Street stands closer to the Democratic establishment than to the Republican Party these days…. The Fannie Mae story is essentially a story of how liberal Wall Streeters raped everyone else — and how the organized leadership of the other groups colluded in the attack.
Mead discussed the relevance of the book to Tea Party principles:
The story illustrates everything the Tea Party thinks about the corrupt Washington establishment and the evils of big government…. It exposes that mix of incompetence and arrogance that is the hallmark of the modern American liberal establishment and links this condescending cluelessness to the real problems of real American families. It links President Obama (through appointments, associations, and friendships) with the worst elements of the Clinton legacy…. If the GOP can make this narrative mainstream, and put this picture into the heads of voters nationwide, the Democrats are toast.