Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon [Hardcover]

Gretchen Morgenson (Author), Joshua Rosner (Author)

Book Description

Release date: May 24, 2011

The New York Times's Pulitzer Prize-winning columnist reveals how the financial meltdown emerged from the toxic interplay of Washington, Wall Street, and corrupt mortgage lenders.

In Reckless Endangerment, Gretchen Morgenson, the star business columnist of The New York Times, exposes how the watchdogs who were supposed to protect the country from financial harm were actually complicit in the actions that finally blew up the American economy.

Drawing on previously untapped sources and building on original research from coauthor Joshua Rosner—who himself raised early warnings with the public and investors, and kept detailed records—Morgenson connects the dots that led to this fiasco.

Morgenson and Rosner draw back the curtain on Fannie Mae, the mortgage-finance giant that grew, with the support of the Clinton administration, through the 1990s, becoming a major opponent of government oversight even as it was benefiting from public subsidies. They expose the role played not only by Fannie Mae executives but also by enablers at Countrywide Financial, Goldman Sachs, the Federal Reserve, HUD, Congress, the FDIC, and the biggest players on Wall Street, to show how greed, aggression, and fear led countless officials to ignore warning signs of an imminent disaster.

Character-rich and definitive in its analysis, this is the one account of the financial crisis you must read.

Editorial Reviews

Review

"Gretchen Morgenson is a national treasure. Year after year, she has dragged Wall Street miscreants out of the shadows, exposing their dirty secrets to the public that they bamboozled with schemes and deceits. Now, working with Joshua Rosner, she has trained her expert eye on the mortgage mess that pushed the American economy to the brink. In stunning detail, Morgenson exposes the truth behind the worst financial calamity of modern times, weaving a tale that is as mesmerizing as it is horrifying. Reckless Endangerment names the names and reveals the secrets of the plutocrats and politicians whose greed and recklessness threatened the foundations of capitalism.  It is essential reading for anyone struggling to understand how America entered the new era of financial chaos."—Kurt Eichenwald, New York Times bestselling author of Conspiracy of Fools and The Informant

"Even before Reckless Endangerment, Gretchen Morgenson was my nominee for Reporter of the Decade for her forensic and prophetic coverage of Wall Street. Now, she and the equally talented sleuth Joshua Rosner, like Holmes and Dr. Watson, have pieced together the clues to a seminal mystery of the financial debacle: how American taxpayers were suckered by the shenanigans, greed, egos, back scratching, and guile of financial and political elites who swarmed like vultures around Fannie Mae, picking it clean of oversight and accountability while its executives gorged themselves on the spoils. Naming names and taking no prisoners, they drill deep into one of the most disturbing scandals of our time, perpetrated in the name of helping "the little guy."  Read it and weep. Read it and vow: Never Again!—Bill Moyers, journalist, and President, Schumann Media Center

"Morgenson and Rosner have written the long-awaited volume that gets to the heart of the mortgage crisis. The fearlessness and breadth of reporting make the book as compellingly readable as it is exhaustive. Reckless Endangerment is a remarkable achievement—and should be required reading for all Americans."—Bryan Burrough, Vanity Fair special correspondent and bestselling author of Barbarians at the Gate and The Big Rich

"Gretchen Morgenson and Josh Rosner show us how, over the last fifteen years, the mortgage lending industry used money and political influence to escape regulation, enrich itself, and create a catastrophe.  Particularly in its dissection of Fannie Mae, Freddie Mac, and their enablers, this book is unmatched in its depth and invaluable to anyone interested in the causes and lessons of the financial crisis."—Charles Ferguson, Academy award-winning director of Inside Job

"A chilling account of the reckless disregard for ethical or civilized values at the heart of our financial system.  If this compelling history does not completely turn your stomach, that's good - because by bailing out these individuals, their attitudes, and their way of life, we have set ourselves up for another nauseating turn of the Financial Wheel."—Simon Johnson, co-author of 13 Bankers: The Wall Street Takeover and The Next Financial Meltdown

About the Author

Gretchen Morgenson is a business reporter and columnist at The New York Times, where she also serves as assistant business and financial editor. She was awarded the Pulitzer Prize in 2002 for her "trenchant and incisive" coverage of Wall Street. Prior to joining the Times in 1998, she worked as a broker at Dean Witter in the 1980s, and as a reporter at Forbes, Worth, and Money magazines. She lives with her husband and son in New York City.

Joshua Rosner is a managing director at the independent research consultancy Graham Fisher and Co. and was among the first analysts to identify accounting problems at the government-sponsored-enterprises and to warn of the coming credit crisis. He advises regulators and institutional investors on housing and mortgage-finance-related issues. He lives in New York City.

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Product Details

• Hardcover: 352 pages
• Publisher: Times Books; 1St Edition edition (May 24, 2011)
• Language: English
• ISBN-10: 0805091203
• ISBN-13: 978-0805091205
• Product Dimensions: 6.1 x 1.1 x 9.2 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (236 customer reviews)
• Amazon Best Sellers Rank: #33,859 in Books (See Top 100 in Books)
  • #52 in Books > Politics & Social Sciences > Politics & Government > Specific Topics > Political Economy
  • #87 in Books > History > Americas > United States > 21st Century
  • #94 in Books > Business & Investing > Economics > Economic History

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Most Helpful Customer Reviews

529 of 556 people found the following review helpful

5.0 out of 5 stars We need more watchdogs like Gretchen and Josh! May 24, 2011

By Srikumar S. Rao VINE™ VOICE

Format:Hardcover|Amazon Verified Purchase

I have long admired Gretchen Morgenson and cheered when she was awarded a Pulitzer. Perhaps this book in conjunction with her hard-hitting NY Times reporting will garner her another one. She deserves it. The authors echo my sentiments precisely in their introduction "...felt compelled to write this book because we are angry that the American economy was almost wrecked by a crowd of self-interested, politically influential and arrogant people who have not been held accountable for their actions." And the people who did it "...continue, even now, to hold sway in the corridors of Wall Street and Washington."

I have nothing against the vastly wealthy and sometimes - OK, frequently - dream wistfully of joining their ranks, but I do care about how this wealth is accumulated. Entrepreneurs who build companies, executives who take these companies to the next level and the one after that, highly talented and gifted persons - in arts and sports - who command premium remuneration all enrich society. Many financial titans, on the other hand, do not create wealth. They are unusually adept in extracting it for personal gain while simultaneously impoverishing society and holding it hostage. They operate on the principle that "My gain is mine and only mine. My loss is actually yours." And they know how to spread enough largesse that enablers like accountants, rating agencies and regulators fall into line and they buy off politicians with consummate skill. They try - increasingly ineffectively - to justify their existence by claiming that they perform crucial service by "allocating capital" and "increasing efficiency." They further claim that they should not be regulated because they can do a better job of regulating themselves. The fish is starting to stink pretty bad.

What makes this book a valuable read is that the authors explain exactly how this process works and they are not shy about naming names. For example, you learn how James Johnson, the erstwhile CEO of Fannie Mae built it into a colossus that gradually jettisoned all prudence in lending and vastly enriched himself and a bunch of cronies. He also suborned powerful legislators like Barney Frank, the powerful Massachusetts Democrat. And, lastly, he looked on and encouraged Wall Street firms to do the same and used that as justification to increase the scale of his own operations. And, Oh! I almost forgot, he also admonished fresh graduates to pursue their careers with "honesty and integrity". When Johnson left Fannie Mae, a senior executive recalled "...we always won, we took no prisoners and we faced little organized political opposition." He continued to be politically influential and was an adviser to the current president until forced to resign because it surfaced that he had received sweetheart loans from a leading purveyor of toxic financial junk.

Did you ever feel that "You scratch my back and I'll scratch yours" is the norm on Wall Street? Consider this: Stephen Friedman, former CEO of Goldman Sachs was a director of Fannie Mae when the directors improperly allowed company executives to set earnings targets that they could meet. Federal investigators concluded that "As a direct result, senior management reaped ongoing and extensive financial rewards through accounting manipulation." Johnson was then inducted to the board of Goldman Sachs - when Hank Paulson became CEO - and promptly made chair of the compensation committee. He dispensed some of the richest paychecks on Wall Street and these became the norm as other firms played catch-up. In fact, Johnson chaired the compensation committees of every board he sat on.

Angelo Mozilo, founder and CEO of Countrywide, was a good friend of Johnson's and used his methods to grow the cancer that was Countrywide. The company made it a policy to give sweetheart loans to persons in power - these VIP loans were informally known as Friends of Angelo loans. Richard Holbrooke got such a loan. So did Senators Chris Dodd, Kent Conrad and Barbara Boxer. So did Donna Shalala, former head of Health and Human Services and Alfonso Jackson, secretary of HUD. And Countrywide hired sons and daughters and relatives of the influential and made sure that they were not fired during mass layoffs. Do you think it is possible, just barely possible, that these policies are what enabled that tumor to grow so large without surgery even being considered?

There were people who tried to stem the disastrous tide such as Mark Kohodes the money manager who shared damaging information about NovaStar - a Countrywide clone - with the SEC to no avail. And Armando Falcon, the regulator who tried to rein in Fannie Mae and was bludgeoned for his pains. And William Brennan of the Atlanta Legal Aid who drafted tough anti-predatory-lending legislation and then had it go nowhere.

This book will make you well informed. It will also make you sad because not much has changed in the system and the same players are still active. Can someone please tell me why we "respect" these CEOs instead of crossing the street when we see them coming our way?

214 of 224 people found the following review helpful

4.0 out of 5 stars Lapdogs as watchdogs, pols in the pocket and giddyup greed!!! May 25, 2011

By Laurence R. Bachmann VINE™ VOICE

Format:Hardcover

Reckless Endangerment chronicles the screwing of America by just about everyone in power: dirty politicians, inept watchdogs and an insatiably avaricious financial community that knew better but didn't care. NY Times reporters Gretchen Morgenson and Joshua Rosner have taken the time to investigate not just players in the financial mess circa 2008 but the 15 years prior when Bill Clinton decided to get behind the dubious notion that everyone should have a stake in the American dream and own their own home.

In theory it all sounded perfect--who could object to people bettering themselves? The only problem was that to make the dream "accessible to all" generations of lending practices and protections would have to be dismantled. Safeguards would be gutted and due diligence would become a nuisance that is brushed aside. There are plenty of culprits here: the usual Wall Street money-mongers and in the 90s and early 00s a Republican Congress in their pocket. But Morgenson and Posner shine a powerfully bright light on the complicity of marquee Democrats such as Bill Clinton, Christopher Dodd and Barney Frank. Toss in Democrat insider Jim Johnson into the cauldron and it is a powerful witches brew.

Jim Johnson, quintessential DC insider used all of these connections in the 90s on behalf of empowering Fannie Mae and eviscerating sound financial practices. Greasing the wheels of powerful polls on banking and finance committees became standard procedure. Finding a sinecure for Barney Frank's boyfriend was a pleasure not a problem (if Frank isn't a criminal it is by a hair's breadth). Libeling the responsible, honest regulators and economists who tried to stop this train-wreck waiting to happen was all in a day's work, and a particular Johnson specialty. Edward DeMarco, Gary Gensler and Marvin Phaups are particularly heroic. When the occasional curious congressman tried to uncover Fannie Mae compensation packages, Johnson squashed them as well, more powerful than our own elected officials.

Sadly, all of the corruption above pales in comparison to Chris Dodd's attachment of an amendment that extended government protection to financial agency's other than bank (Fannie Mae, insurance companies, et al) As a result, we not only get to save Fannie and Freddie--we get to pay the legal bills of everyone who is being sued because of their reckless behavior. What did Chris Dodd get? Maximum campaign contributions and a sweetheart mortgage, naturally.

Today, who is getting the blame? The poor of course. The people who shouldn't EVER have qualified for a loan but could get one are now told they should have known better! Better than bankers who told them they could? Better than Wall Street regulators who told them they should? Better than Secretaries of the Treasury who told them they were fools not to? Today they are buried in bankruptcy or mountains of debt. Middle class Americans are paying the bill and the money class who created the mess are still meeting at Davos or presiding over their conservative and liberal think tanks.

If I have one criticism of the book it is with regards to full disclosure. While trawling the NY Times web site I learned that Gretchen Morgenson was once an employee of Steve Forbes and a campaign manager during his run for the presidency based in large part as a proponent of a flat-tax. Nothing wrong with that except Fannie Mae took the flat tax proposal as a threat and went after Forbes big time in New Hampshire. Their attack ads, which Morgenson presents as detrimental to the campaign were also detrimental to her self-interest at the time. This should have been revealed before chapter 1. Perhaps it means nothing but if we are critical of Fannie Mae for its lack of transparency, what about Morgenson?

Toward the end of the book I was incredibly depressed. It is one thing to be so royally screwed, but surely we have learned lessons from it and will prevent it happening again, right? Wrong. Morgenson and Posner make it crystal clear that pretty much the same financial system that was in place 5 years ago is still in place today. The 2009 revisions to regulations are about as dependable as New Orlean's levees. Massive bank failures in the 80s were followed by financial crisis and collapse in '08. Collective memory seems to be shortest of all and already fading. How sad and frustrating.

P.T. Barnum was wrong. In America today it seems there is a sucker born every second.

155 of 170 people found the following review helpful

5.0 out of 5 stars Finally someone gets it! May 25, 2011

By Raven26

Format:Hardcover

Morgenson and Rosner have done their homework and written an in depth and hard-hitting book that reveals with perfect clarity how this mess began. It's refreshing to read a book that doesn't rehash the Wall Street stories we've all heard over and over. I'm much more interested at this point in the characters in Washington who were championing home ownership and enriching themselves as they set the stage for disaster, and who really have remained blameless up to now. The sense of outrage the authors feel comes through on every page and the book is actually a page-turner in addition to being a real narrative, unlike some of the other books on the crisis, with a beginning and an end. Great storytelling and great reporting as well. Read it!!!