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224 of 237 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
This review is from: Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon (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.
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Showing 1-10 of 47 posts in this discussion
Initial post: Jun 8, 2011 3:46:42 PM PDT
Last edited by the author on Jun 9, 2011 2:46:17 AM PDT
An anecdote from the middle aged:
growing up in the Nixon-Carter era as an alert pre-teen in a politically active NY liberal household, and then coming of age in the Reagan Years, supposedly a period of "abject horror" (said Michael Stipe of REM, who had a much bigger audience for his pronouncements that Ms Morgenson ever will), I was told something called "redlining" was the Original Sin, the refusal to extend credit to poor urban neighborhoods, the scourge of the cities, tinged with racism, and foisted by Dark Satanic Banks.
Today, the same media voices (NYT et al) who roared about redlining -- a word we will not hear uttered again for some time -- coo about "underwriting." Where was the underwriting during the boom years of fraudlulent mortgages?
Such underwriting was labeled redlining by opinion makers, the press, the democratic party, academia and the likes of ACORN. Underwriting is redlining. In fact it should just be called underlining. And it was an obscenity in the mouth of the elites for decades (Ken Burns devoted a substantial chunk of his PBS series about NYC to the literal creation of the red line, and the NY suburbs and freeway system, by New Deal technocrats), but interestingly, redlining became a moot issue in the Clinton-GW Bush era (for yes this became a bipartisan fiasco, but it was still unthinkable without the dems. Bush was a peculiar Big Gov't Republican). Like the treason of Alger Hiss, whose apologists have kept silent since his exposure (the Hiss affair launched whole journalistic careers being launched in devising libelous characterizations of RM Nixon, so one cannot now declare him Right), the vilifiers of redlining will not apologize, even as they now talk out of the other side of their mouths mourning about "where was the underwriting."
This is a staw man argument, but man, if you were around activists in the early '80's and you mentioned redlining, people would go off. Now the word has been erased from the vocabulary, like Trotsky being taken out of Politburo portraits, as an embarrassment to those who once wielded it in the powerful invective that double-teamed community activists, think tanks/academics, congressional dems, banks ducking charges of raaaacism, and eventually Wall Street.
Watch out if it ever comes back.
(A PS -- does anyone remember how Bill Clinton beguiled us with homespun wonkishness during the '92 campaign in extolling third world microcredit banks? It sounded oh-so-the-marriage-of-Hayek-Thirld World Exoticism-and social justice. It took us a while, but now we know his big economic innovation was a trendily disguised form of subprime lending....and we all know where that led us once legitimated in DC by Bill's think tank and banking buddies...

In reply to an earlier post on Jun 9, 2011 3:02:57 PM PDT
Redlining is so illogical! I am a math prof, and tell my students the govt concept of ordering banks to issue mortgages at lower rates than the banks need to stay in business cannot work. I said this before the crash, and repeat it now. There are rules of logic, and Cong. B. Frank violated these rules. See the new book, Rational Thinking, Government Policies, Science, and Living. Rational thinking starts with clearly stated principles, continues with logical deductions, and then examines empirical evidence to possibly modify the principles.

Posted on Jun 9, 2011 4:20:33 PM PDT
Based on all the reviews I have seen and heard, I am purchasing this book. Justice, I believe, could begin to be served if it were to be made into a mini-series for all to witness. Sadly, however, the political powerhouses who are indicted in the book will never let the true story be told over the airwaves. And so it goes, and goes.. Unless the people DEMAND a full accounting once and for all.

In reply to an earlier post on Jun 9, 2011 6:20:42 PM PDT
Jebra says:
Another anecdote: I worked at a company in Arizona that hired many illegal aliens. One of my office co-workers, who was a legal citizen, lived with an illegal alien and their children in a small house that was nearly paid for. When the sub-prime craze burst upon us, she and her boyfriend applied for a house 4 times the size of the one they were close to owning. I was shocked when she told me what the monthly payment was going to be; I knew how much she was paid and it was far below what she needed to make to afford this house. I assumed they would not be using the boyfriend's income since it could not be verified. That was the next shock: they accepted his say-so without verification. When they asked her about late payments she had made, she demanded in a loud, angry voice that half the people in the company could hear that they stop discriminating against her.

I could not believe it when they approved the loan. She sold the little house she was so close to paying off and when I left the company she was in the process of moving into her new house. I was not surprised at all when I heard a year later that she had been foreclosed on. Hers was one of the earliest foreclosures in a state that is in the top three for foreclosures. Gee, who could have seen that coming? (/sarc)

This book is filled with crooks who need to account for their crimes - there is no way my co-worker should ever have been approved for a loan like that - but some of the blame also lies with stupid, irresponsible people who should know better than to take on the kind of debt that could ruin them.

In reply to an earlier post on Jun 10, 2011 7:56:42 AM PDT
I don't disagree with the observation that "some of the blame also lies with stupid irresponsible people who should know better than to take on the kind of debt that could ruin them" but when everyone from banks to tv commentators to treasury secretaries are telling you to do this or you are stupid not to, there's plenty of blame to share.

Posted on Jun 10, 2011 10:34:56 AM PDT
"Today, who is getting the blame? The poor of course." Yeah, that's right--we should really be blaming those loan officers who went into ghettos, kidnapped various poor people, frogmarched them into bank branches, and forced them to sign mortgages at gunpoint. Oh wait--that didn't happen.

Who in the public sphere is blaming the poor, anyway? Can you provide a quote?

Although the banks certainly have their share of guilt--bundling these toxic loans into securities so that these time-bombs would explode at some distance from the site of origination--"the poor" (euphemism for certain low-income people who irresponsibly and knowingly gamed the system) also deserve their share. I know it's anecdotal, but here's one example: my idiot brother-in-law, who bought a huge flatscreen, a Carolina skiff, and a new Mustang shortly after he got his home loan. When he could no longer afford the house payments after the initial low-interest period, he and my sister just left the house and moved into an apartment. Now the bank owns a property that nobody wants because it looks horrible. This in turn drove down the value of neighbors' properties. Multiply that times a million all over the country, and you have the subprime mortgage crisis.

The ones who seem to have suffered the most--although you never hear it in the leftist media--are the middle-class people who acted responsibly and did not try to live outside their means.

In reply to an earlier post on Jun 10, 2011 4:51:09 PM PDT
Definition of "poverty" today in the US would come as a big surprise to most of the rest of the world's inhabitants.

In reply to an earlier post on Jun 11, 2011 1:03:34 PM PDT
So they're really upper-middle class in South Africa, just not living in South Africa. What a stupid observation.

In reply to an earlier post on Jun 11, 2011 7:03:45 PM PDT
[Deleted by the author on Jun 12, 2011 2:11:01 AM PDT]

In reply to an earlier post on Jun 13, 2011 9:28:24 AM PDT
That's me, Mr. Stupid.
Please tell me why I'm stupid, not with an apercu, but a refutation, if you're going to take the trouble to call me names. I expect no less from the author of this very good review and generally thoughtful commentary below. I generally take rage as an admission that the provoking statement was in fact correct, so do yourself some credit and furnish a response. Then maybe I'll admit my observation was stupid.
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