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Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon Hardcover – May 24, 2011
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“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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Top Customer Reviews
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?
Congressman Barney Frank's initial support for homeownership for all, following Clinton's push on this front, was enough of an excuse for the markets to loosen up their funds and buy mortgages. As the volume of mortgages picked up, Jim Johnson and his Fannie Mae realized that in order to keep their spot on this merry-go-round, they would have to loosen their purse strings. Not to be outdone, the "Too big to fail" banks piled in, each creating its own brand of mortgage investments, each more toxic than its predecessor.
As I was reading this wonderful book, I had a sense of dread for the future, just from the chain of events as provided by these two great authors. I know the outcome from my perspective of today, I believe I could have concluded the outcome had this work and information been available 5-10 years ago.
I would have liked just a bit more about the media in the chain of events, particularly the role played by CNBC. The network that advertises itself as "First in Business" was a cheerleader for the toxic loans, investment banks who sold the CDO's to unsuspecting customers, and Cramer's wildly supportive interview with Mozilo seemingly only a few months before the crash. Or Rick Santelli's famous rant of how it was all the homeowners fault.
Sadly, there was so much ill-gotten money that ended up in the lobbyist hands and congressional pockets, that little has changed. Jim Johnson and Frank Reines of Fannie should be in jail for fraud. Chris Dodd read the handwriting on the wall, and wisely left congress for a private sector job. Barney Frank is still in Congress, none the less for wear. Mozillo of Countrywide, one of the largest players in the fraudulent loan market, instead of being in a cell, got off with a $67 million fine, most of which Bank America paid. The leaders of the companies forced out of business or to the brink, like Fuld of Lehman or Thain of Merrill, received huge golden parachutes. Blankenship (We're doing God's work) of Sachs, and Dimon of Morgan continue at the helm, earning record salaries and bonuses.
And no amount of disdain is too much for Hank Paulson, GW Bush's secretary of the treasury and former Goldman Sachs CEO. He looked away far too long, and allowed this disease to grow uncontrolled for several years. At the last minute, when forced into an economic corner, he created the infamous TARP bailout for his "Too big to fail" friends on Wall Street. Only slightly less clueless were Bernake and Geitner of the fed, and their leader, Greenspan.These three held an absolute faith that the "Banks would always do the right thing." We now know how that worked out.
"Reckless Endangerment" is a hard book to put down for those interested in the roots of our current economic crisis. There are many good books out there about the crash, foreclosure crisis, and the resulting economic crash. I have read many of them. What this book does that no one else has clearly written about is the why's and wherefor's of how it all began. I found this to be a compelling read, and would recommend it to any serious reader of the times.
Most Recent Customer Reviews
The book should be used as reference in management studies.Read more