May 27th, 2011
03:33 AM GMT
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There have been many books written about the financial crisis: What caused it, who’s to blame and how it could have – and should have – been prevented.

This new one, “Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon,” lives up to its lengthy title and gets deep into the weeds of who did what, when and how.  In short, Gretchen Morgenson and Joshua Rosner name names and connect the dots.

Singled out for particular criticism, James Johnson, former CEO of Fannie Mae, who the authors say built the U.S. backer of mortgages into “the largest and most powerful financial institution in the world.”  And that’s not a good thing—not in this case.  The authors paint a painstaking portrait of the way they allege Johnson, and so many others, used money and political influence to get around the rules, get rich, and create a catastrophe.

Fannie Mae was not a lender, nor was it a bank.  The U.S. government created the institution in the 1930s to steady the housing market in times of crisis, especially if bank money became unavailable for mortgages.  However, Fannie Mae became something else, a behemoth charged with keeping the mortgage market flush with capital by purchasing mortgages made by banks, or by guaranteeing them, allowing banks to go out and lend even more.

But Morgenson and Rosner say Fannie Mae cheated on its accounting, paid huge bonuses to its executives and political friends, and encouraged the absurdly risky financial practices that led to the meltdown.

I interviewed the authors on World Business today, and asked them to link it all up for us:  From the mortgage industry to the financial “enablers” such as Goldman Sachs, Morgenson and Rosner describe a perfect storm.

What’s new in this? Well it’s true, we already know the housing bubble sparked the U.S. crisis, but in this book you’ll learn who allegedly did what.  You’ll understand the sycophantic relationship between the large investment houses and the mortgage backers. The authors identify powerful people and include startling detail about their alleged involvement.  Many of them, the authors say, continue to hold power in crucial places.

It’s yet another chapter in the horror story of the aftermath of the financial crisis.  Most of us can only read this stuff and shake our heads—again and again.

And know that the only certain this is this: It could all easily happen again.



soundoff (46 Responses)
  1. PissedOff

    And now you know why they want to end collective bargaining, are outsourcing, and don't want to lose their tax breaks. Read this book and wake up America!

    May 27, 2011 at 6:45 am |
  2. DK

    Let people see the movie "Inside Job" after / before reading this book.
    Free market capitalism relegated to cronyism and made the sole superpower loook like a financial banana republic!!!!

    May 27, 2011 at 9:37 am |
  3. fa_and_kc

    I confused about the phrase "It could all easily happen again." There are a lot of people without work, retired folks with no money left and a national dept that continues to place a burden on the people who will pay for it, out grand kids. I would argue the crisis is ongoing.

    May 27, 2011 at 10:56 am |
  4. Wake Up.

    dotcom and subprime were appetizers the main course is about to get served and it's gonna get real ugly.

    May 27, 2011 at 12:40 pm |
  5. jerry crownover

    Keep govt. out of business. A lesson learned.

    May 27, 2011 at 1:10 pm |
  6. Michael

    The collapse was caused by the Federal Reserve and US Govt. inflating the money supply. Ron Paul, Peter Schiff and many others warned about coming collapse back in 2007 but did anyone listen?! So the Fed continues to dump more worthless paper money into the system, the dollar becomes worth-less every day. Compare it to the price of Gold or Silver and see! A QE3's gonna be coming.....don't you worry about that! The Republican contenders for the Presidency have no idea how to fix the problems of the economy and none of 'em, except Ron Paul, say, "let's go back to sound money" as required in the Constitution.

    So long as the Federal Reserve and US Govt. rely upon paper money they can print up as much as they want and ruin the value of any existing savings.

    May 27, 2011 at 1:49 pm |
  7. Larry

    Sorry Jerry, if the lesson had been learnt regulations preventing it happening again would have been passed, they have not.

    May 27, 2011 at 1:52 pm |
  8. e

    If CEOs could actually follow the rules of this country and not constantly look for loopholes to gain more profit, this mess we call an economy might be a little less bad right now.

    May 27, 2011 at 2:01 pm |
  9. Carl

    Yes all this is true. But we are all equally guilty having joined the party of GREEDY people and sharing in the cake of real estate equities and stock. There is always someone you meet who capitalised on the equity of their homes or stocks, and are biting their nails today, We fed the frankenstein of modern day greed and we are still feeding it today. Just follow the stock markets and all you see is greed fuelled speculation. We all want to become overnight millionaires at any cost

    May 27, 2011 at 2:04 pm |
  10. Yago

    I wonder, if the problem of the Economical Meltdown relies only on the Financial and Mortgage System.
    One by one, all our major industries fall into the same patters of Corruption, Political intervention and abuse, that have been eroding our Democratic Institutes for at least 40 years.
    Little by little, the Government loose its capacity to control those that created the Crash on the 29. Now, it looks more the political systes ( and this goes for both parties) are only working for themselves and to benefit this conglomeration of people and industries, giving Government responsibilities to them and weaken the Regulatory System over them, leaving the media american exposed to the depredatory ways of the Corporations.
    Laws, Regulations, Wars, and commonly Government responsibilities, have been giving to this Corporate Conglomeration by the Supreme Courts, the Senate and the Congress of our Nation, more oven when many ex executives and lawyers are part of this extractor working for their ex bosses.
    Sadly, this problem is so inside the Political System, that till We the People, react against this and forced for Change and Clean Up, this will expand deeper, and one day we won't be able understand how we got into this Savage Fascism.

    May 27, 2011 at 2:10 pm |
  11. comeon

    although the banks played their part in the financial crisis, the American consumer played a SIGNIFICANT role in the crisis as well. having been in the financial industry as the crisis was building and subsequently unraveling, i saw firsthand consumers applying for credit they could not afford. the banks deserve their blame, but consumers need to understand the role they played as well.

    May 27, 2011 at 2:11 pm |
  12. Reg

    The financial system's become an nontransparent box of tricks, designed to daze and confuse people. All this to rob the unsuspecting masses that never wanted anything to to do with it, but were dragged into it anyway. So then we wonder why economies are collapsing! With all this gnawing at the fundamental pillars of economy, don't you expect it to fall? Mobile as this circus maybe, it's victims catch up with it eventually, and thus battle begins.

    May 27, 2011 at 2:26 pm |
  13. PissedOff

    Jerry – the "line" you just stated is the reason they get away with what they are doing. You are one of the many who just keeps repeating the statements that some are feeding us; you aren't thinking any deeper about what's going on. That's the problem.

    It isn't the "government"; it is select individuals reaching poweful positions who are then able to manipulate and control us – and the market – and no one stops them. "The authors paint a painstaking portrait of the way they allege Johnson, and so many others, used money and political influence to get around the rules, get rich, and create a catastrophe".

    You know how pick pockets work, right? They distract you to look over "there", while reaching into your pocket. That's what they are doing and because you aren't stepping back and thinking objectively, they keep doing it.

    All of us have allowed this to happen because the average person simply cannot even imagine that there are people in this world who are truly corrupt. These "people" do NOT care about anyone lower than themselves. You are a peon. Taking away from others is their game and they are willing to take down their own companies to get rich.

    Why is 99% of this country's population allowing 1% to dictate what's best for us? The heads of these companies get in bed with the corrupt in government to enact what THEY want. Why are we letting millionaires dictate that we don't need social security, healthcare, affordable mortgages, paid vacation and sick time...the BASICS? The sad thing is that all of these will be taken away soon because they've overloaded the government with debt...just what they engineered ...their objective.

    We all need to start thinking differently. Please, read the book. You've heard of the term serial killer, right? Guess what...their are serial killers who don't murder in cold blood; they murder through power. Their drive isn't just about money, power and sex..it's about control. The same type of rare individual exists in both realms – the Psychopath. To them, the words "tree" and "rape" have the same effect – none.

    May 27, 2011 at 2:48 pm |
  14. quieteye

    Though many Demcrats go along, the Republican led policies (Phill Gramm, Dick Armey, DeLay, Bush, etc.) of deregulation instituionalized process of government for sale. Witness Eric Cantor recently addressing an investment group known to drive up oil prices and calling them leaders! IN REALITY – "We The People" largely stay quiet instead of demanding respresentation as intended, not pay to play now the norm.

    May 27, 2011 at 3:00 pm |
  15. Bart Hawkins

    The financial crisis is what comes from government (or quasi-government) attempting to manage ANYTHING other than collecting taxes and keeping a military ready...absolute disaster.

    Incompetence is the least of it, thievery the most, and the perps have yet to do the walk.

    Bear in mind that equality before the law does not equate to a decent credit score, yet the banks were FORCED to treat all as "equal," whether they could pay the notes or not (for fear of being accused as racists, which fear has permeated our entire society today – to the extent that the Obamas have an Imperial Presidency the likes of which Lyndon Johnson could only dream)......

    We are living in the center of a cotton ball, surrounded by untruth, mistruth, halftruth, and simple lies.

    And it is all starting OVER again, as the banks are once again engaging in subprime lending!!!!

    On our dime, of course.

    Sigh.

    May 27, 2011 at 4:11 pm |
  16. BBoy705

    @PissedOff – So well put that your comments should be required reading! Read The Real Housewives of Wall Street | Rolling Stone Politics – http://www.rollingstone.com for more sickening information about the top 1% and their collective efforts to screw all of us! What the hell is happening that anyone who is not in the top 1% believes that tax breaks for these thieves is the right way to go? The middle and lower class of American society need a real champion who is willing to take on the robber barons of today and throw the lot of them in jail... or off the top of some tall building!

    May 27, 2011 at 4:18 pm |
  17. KH

    Dear Pissed Off, well said!

    May 27, 2011 at 4:23 pm |
  18. Marie

    They should have mentioned another set of enablers ... the real estate appraisers that so willingly artificially, on the coaxing of mortgage brokers, increased the values of all those properties that are now underwater!

    May 27, 2011 at 4:31 pm |
  19. Marie

    I should have qualified the brokers I mentioned in my earlier post ... greedy mortgage brokers!

    May 27, 2011 at 4:32 pm |
  20. Have-Not

    This situation is not new. History nothing but a succession of frauds commited by those who have agains't those who have not. This gap is ever widening. This is nothing but a system of financial slavery: Peolpe have to work harder every day, just to be able to feed their families, while others simply print money.

    May 27, 2011 at 4:52 pm |
  21. seppe

    You cannot blame the consumer for applying for credit that they cannot,is the responsibility of the bank to tell the consumer how much credit they can afford.

    May 27, 2011 at 6:25 pm |
  22. seppe

    On less ,something is done and quick,a bigger one is coming.

    May 27, 2011 at 6:32 pm |
  23. seppe

    What good is to me to purchase a book? This smells to me of few guys like Gretchen Morgensen&Joshua Rosner (nice chinese names)that will want to make lot of money by telling the detail of the scam.

    May 27, 2011 at 6:47 pm |
  24. Russel Jeffords

    I might further add that those who pay NO TAXES (47% of the population) are every bit as greedy, malicious, thieving, and corrupt as the zillionaires who induced the eco crisis to enrich themselves.

    Bottom line is seniors receiving government benefits now were substantially undertaxed for them (didn't the Gov employ actuaries? One has to wonder....); many citizens steal government benefits (i.e. underreport income to achieve food stamps, Medicaid, and the like)....in short, the financial crisis is just a symptom, and for once the rich robbed everyone rather than the poor continually robbing the rich. We as a nation will FAIL unless all step up and pay their fair share – perhaps via a national sales tax?

    NO REPRESENTATION WITHOUT TAXATION!

    May 27, 2011 at 8:13 pm |
  25. PissedOff

    Thanks for the kind words. It is so distressing to see people post who aren't seeing where the real heart of the problem lies, to see them still blame "Obama", the "government", regulation, etc. It's not the government...we are the government ..."we the people". Are they then blaming themselves? No, of course not.

    We are ready to blame the corporations and the government instead of the small set of problem PEOPLE. What needs to be regulated is GREED. They do not care about you. They do not care if you end up living in a cardboard box...they are going to retire wealthy...with no need for health insurance, social security, etc because they will just pay with cash. How will they retire wealthy? Because they are taking it from you....from our salaries, pensions, retirement. How can they do that? By running up the debt, causing the housing crisis, repeaping larger profits by outsourcing jobs and expecting the people remaining to pick up the slack. They then have you where they want you...in a weak position, too scared to demand changes or you will face losing what job you may still have.

    Until everyone realizes that true regulation must exist to both protect and serve "we the people", we are letting them take everything.

    May 27, 2011 at 8:26 pm |
  26. Maxxine

    This book reads like the end of the middle class brought to you by the "democrats"- Frank, Dodd, Summers, Geitner, Rubin, Emanuel, Clinton, Donilon, Daley, Obama etc. etc. etc. We need honorable people with integrity. This guy Johnson should go to prison. That Obama had Johnson backing him tells everybody where he stands. "Inside Story" by Ferguson tells the same story "crony capitalism" continues with Obama at the helm- Gasparino "Bought and Paid for also details corruption bt Obama friends. And I used to be a Lifelong Democrat. Morgenson And Rosner are honorable Americans.

    May 27, 2011 at 9:01 pm |
  27. Maxxine

    Johnson "became wealthy" off the backs of middle class people. They are NOT HONORABLE Americans. THey could care less if anybody lost their homes, jobs, or savings- they made hundreds of million or billions of dollars at they are still controlling the policies in DC- welcome to America.
    ditto to pissed off- 'These "people" do NOT care about anyone lower than themselves. You are a peon. Taking away from others is their game and they are willing to take down their own companies to get rich"

    May 27, 2011 at 9:11 pm |
  28. David L. Kendig

    If you would like to read about the 7 year history of the collapse of FANNIE MAE (starting on July 29, 2003 ) then please visit http://www.GreatDepression2.com

    May 27, 2011 at 9:35 pm |
  29. Phil

    Market crashes are as old as stock markets. They started long before adequate government regulation. Only smart regulation and strong institutions can keep the natural instability of markets in check.

    Look up the South Seas Bubble in the 1700s, the Panic of 1797, the Panic of 1825, Great Crash of 1929, and innumerable smaller ones (one or two per decade).

    Or, if you dislike history, compare bank regulation in countries that suffered in the Subprime Mortgage crisis (e.g. US, Britain) vs in Canada. Yes, Canadian banks are very heavily regulated, highly profitable, and totally stable. And so when Wall Street had a heart attack, Main Street in Canada got a mild cold and carried on almost unscathed.

    May 27, 2011 at 10:32 pm |
  30. ThatsNotTrue:[

    Greed, always the problem, especially with the free market....and lobbists..................and big corporations. Not for the common people, that's for sure....

    May 28, 2011 at 12:43 am |
  31. PissedOff

    Hi Maxxine – in the end, we agree. But when they have us resort to saying things like "This book reads like the end of the middle class brought to you by the "democrats"", most people in this country just hear "it's the democrats' fault" and then fight back with "no, it's the republicans". This is where we are all failing – this is EXACTLY what they want us to do so they can continue. The minute all of us stop talking "democrat/republican" and start evaluating and questioning a person's leadership and decision making abilities, they will be exposed.

    Both sides have some very bad people in powerful key roles. These bankers are working both sides of the aisle – whomever they see as in power. That's why we have to change the rhetoric, all of us. As you state, we need to vote in people with integrity and I'll add "regardless of political affiliation". I have a gut feeling that these select few are all working together...imagine that for a second...fooling us into thinking that they are opposed to each other, yet they are in cahoots...wouldn't that be something?

    Quotes:
    "Am I the only guy in this country who's fed up with what's happening? Where the hell is our outrage? We should be screaming bloody murder. We've got a gang of clueless bozos steering our ship of state right over a cliff, we've got corporate gangsters stealing us blind, and we can't even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, "Stay the course."
    Stay the course? You've got to be kidding. This is America, not the damned Titanic. I'll give you a sound bite: Throw the bums out!" Lee Iacocca, 2007

    "...if you want to test a man's character, give him power" Abraham Lincoln

    May 28, 2011 at 1:14 am |
  32. michael coleman

    and in times of economic hardship the G8 has decided to give about $40 billion to the arabs if they stop fighting each other .
    All oil rich nations , this is a joke .

    May 28, 2011 at 7:37 am |
  33. Jack Barnes

    Reading through the comments here I get the feeling that with the financial meltdown and its consequences it has a least awakened of some people from their slumber. The world needs to wake up and realize that with education and knowledge we can make a difference.
    Einstein wrote “Only two things are infinite, the universe and human stupidity, and I'm not sure about the former”
    God bless America
    From Ireland

    May 28, 2011 at 12:08 pm |
  34. 14Mickey

    The photo for the book cover tells me the book will be overblown and neglectful of objective facts. I prefer facts to hysteria. No thanks, pass.

    May 29, 2011 at 1:49 am |
  35. seppe

    I don't care to know the details of the scam,it will make more sense,if we all suggest some better and safer ways,to do business with the financial scavengers,and just remember above all, your position to take with this specimens,is defensive just like a chest game, play with black chips and let them make the first move,

    May 29, 2011 at 6:49 am |
  36. ALEX

    Crash a whole economy and get away with it.
    The only way to get rid of such crooked bastards is to get down to their level and give it right back to them.
    They created misery across the planet for their own benefit, they should either be goon squaded or face the death penalty.
    It makes me sick

    May 29, 2011 at 10:46 am |
  37. Marcellus

    I don't need to read this book. The problems lie in the fundamentals of the system which we have created, the rest is all history and doesn't add much to what we need to solve the current issues. The focus on short term (calculated) profits and (exponential) growth automatically leads to a system that has systemic imbalances. The (unsustainable) debt issues is one the results – people who are responsible for unaccounted and unfunded spending are the real criminals. The crisis is an ongoing process which will ultimately leads to impoverishment, social instability and in worst case wars. And as we know, wars have never solved any problems. Better read Sun Tzi, The Art of War, instead. That is a more useful book to spend your time (and money) on and you may even learn something. Not profit itself, but the way profit is created is the real issue. In other words, if we do not change the fundamentals of the system a new crisis is inevitable.

    May 29, 2011 at 12:12 pm |
  38. Frank

    Nobody went to jail. Even Clinton hired these crooks! Now, Obama has hired the same banker crooks. The government it run by the banks. The middle class is screwed. What about the poor? Jesus asked. To hell with the poor most America think, though they don't say it out loud. What a rotten culture. See you in church, or temple, or hell... :)

    May 29, 2011 at 3:53 pm |
  39. Anonymous

    I was ready to buy this book until this article seems to place the blame on Fannie Mae which had worked well for decades, and doesn't mention the securitization and derivatives that really caused the financial crisis.

    May 29, 2011 at 5:45 pm |
  40. seppe

    NO BODY, SHUOLD PURCHASE THE BOOK ,JUST TO LEARN THE DETAIL OF THE SCAM,THE POOR WILL BE MORE POOR, THE ONLY THING THAT WILL DO IS TO MAKE TWO MORE WEALTY PEOPLE .

    May 31, 2011 at 1:50 pm |
  41. lolcface

    It is interesting how people blame governments being to controlling for the unregulated market that has caused economic disasters sense it's creation. Of course these people are also idiots who believe the propaganda about "big" government while ignoring giant corperations taking over the world.

    May 31, 2011 at 3:57 pm |
  42. El Kababa

    Capitalism died in 1980. It has been replaced by Corporatism.

    Back when Capitalism existed, producers of goods and services competed for customers by increasing quality and reducing price.

    In Corporatism, producers of goods and services much prefer buying a competitor to competing with him. The goal of global corporations is to reduce the group of competitors to a small group of conspirators. They cook the books, control supply, control demand with false advertising, undermine democratic institutions with bribery, pretty girls, and campaign contributions. They seek to reduce wages while demanding more work from employees. The 40 hour week has become a quaint relic of better days. Employees are no longer partners in the activity, they are viewed as a regrettable cost which must be cut to the bone.

    June 1, 2011 at 8:34 pm |
  43. One more

    I have read all the posts wilth great interest. As an outsider (from Poland), I can tell You that never before I have seen so many people (in USA) angry and frustrated. In fact I always liked You, Americans for Your optimism, regardless the obstacles. As You propably aware, problems You are facing are not limited to USA unfortunately. Globalism seemed to a good idea at first... . As said before, what we have experienced so far is just an appetizer, no QE XXX will help, it will only exaggerate the problem. Now since we all (almost) agree on roots of the problem and that there is a pressing need for truly fundamental change, what are we going to do about it ?. Because it will take more than just a stripping few bankers off their powerfull influence. Everyone of us is a greedy banker, all it takes is just an opportunity. Are we ready?.

    June 3, 2011 at 1:43 pm |
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