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

Tea Party Nuclear weapon ...

In Reckless Engagement, the latest book about the financial crisis, co-authors Gretchen Morgenson and Josh Rosner do what many of their high-profile counterparts failed to do: Name names for those responsible for the crisis.

"Instead of it seeming like it was an 'act of god' that couldn't have been prevented, we try to single out some of the people who were crucial at the center in the years leading up the crisis, not just when it struck," says Morgenson, a Pulitzer-prize winning journalist with The NY Times.

While familiar culprits like Alan Greenspan, Robert Rubin, Barney Frank are cited in the book, front and center is a name most Americans probably don't know: James Johnson, the former chairman and CEO of Fannie Mae.
Johnson ran Fannie for most of the 1990s and, according to Morgenson and Rosner, was instrumental in expanding the company's size and influence.

"It might seem like he left the scene well before everything started to collapse but what he ended up doing was really building the company up and really imperiling the taxpayers," Morgenson says. "[Johnson was] learning and teaching others how to manipulate Congress and get [Fannie's] regulator to be a 98-pound weakling."

In essence, Morgenson and Rosner view Johnson as the man who wrote the playbook Wall Street would follow in the late 1990s and early 2000s, when it scored a series of deregulatory victories.

Fannie Mae also showed Wall Street the path to riches via the securitization of mortgages.

"There's plenty of bad guys here," says Rosner, a partner at Graham Fisher, an independent research firm. "It is [Fannie], it is Congress, it is the regulator. It's the borrower for not taking responsibility for their financial literacy, but they were certainly taken advantage of also."

Wall Street firms and other non-bank mortgage lenders were certainly among those taking advantage of borrowers and the national obsession with home ownership in the 1990s and early 2000s.

"There was a symbiotic relationship" between Wall Street and the GSEs, Rosner says. "Fannie and Freddie were the largest buyers of...subprime securities the street was bundling, packaging and selling themselves."

While the extent of Fannie's and Freddie's role in the crisis is debatable -- no one forced Bear Stearns and Lehman Brothers to leverage themselves 50 to 1, or AIG to write $3 trillion wroth of credit default swaps — there's no debating the huge costs taxpayers have incurred to rescue the GSEs.

Recalling that Congress "did not deal with [Fannie and Freddie] at all in Dodd-Frank," Morgenson says "job one this year" should be figuring out how to deal with Fannie and Freddie.

But Morgenson has little confidence there will be an intelligent resolution of the situation anytime soon: "It's unfortunate [but] I think we are still very, very far from having an honest discussion about these issues," she says.

BUT: They glosses over the CRA 1977 and what ACORN had to do with it all.

Sub Prime Mortgage Crash -- How it happened

Words mean things, I wonder why they are called sub-prime mortgages?

Liberals do it every time ... The people in Washington, i.e. Congressmen and Senators, 'both parties', who were supposed to be looking out for you, looking out for America, were looking out for themselves.

Why were the banks giving out home loans to borrowers who were not qualified -- Because the laws passed by Congress forced them to. The banks and others also were allowed by law, to record the bad loans as assets.

It was regulation and laws that redistributed wealth to poor and others who could not afford homes because there were quotas to be met, all forced by regulations and laws, with the probable outcome -- Socialism run amok.

All roads to this crash of the financial system lead through Fannie Mae and Freddie Mac ...




And then it was off to the races, as the banks tried to dump the crap mortgages that no one ever thought would be repaid, on people who should have know better. But hey the mortgages that Fannie and Freddie put out were backed by the full faith and credit of the USA --- Right??? It was only fair, RIGHT???




History is your friend:

This all started in the Carter years with the CRA for primarily low income home buyers -- Otherwise known as unqualified buyers. 1977's Community Reinvestment Act(CRA) which required banks and savings institutions to make loans to the lower-income areas in the communities they served. Read that as unqualified buyers, that was the goal, give loans to those who could not afford to repay, it was only fair, don't you know.

Then in the 1990s, the Clinton and Democrat obsession with doing away with the nonexistent process of 'redlining' continued. The sub-prime loans were bundled and shipped off to Fannie and Freddie and others to use as collateral to back up requirements for capital at those institutions.

Association of Community Organizations for Reform Now, is the nation's largest community organization of low and moderate income families -- ACORN, who was pushing this practice on all fronts, was street agitator Obama's employer -- Obama was one of the lawyers who represented ACORN in forcing more sub-prime loans. The threats to banks and others who wouldn't take the sub-prime loans on continued. All was fine since FANNIE and FREDDIE were backing up the paper.

In 1999 -- An agreement between the Clinton administration and congressional Republicans, sets the stage for passage of the most sweeping banking deregulation bill in American history, lifting virtually all restraints on the operation of the financial system. The result was the Gramm-Leach-Bliley Financial Services Modernization Act of 1999.

The certain result of repeal of most of the remaining restrictions of Glass-Steagall it was thought there would be a wave of new money pumped into the unqualified buyer home market -- Most saw this as an area of expansion of market. The Wall Street Journal wrote, "With the stroke of the president's pen, investment firms like Merrill Lynch & Co. and banks like Bank of America Corp., are expected to be on the prowl for acquisitions." The financial press predicted that the most likely mergers would come from big banks acquiring insurance brokerage companies, with John Hancock, Prudential and The Hartford all expected to be targeted.

Short history of the Glass-Steagal Act up until it's repeal in 1999. It took $100s of millions in lobbyist payoffs to Congress people before Glass-Steagall was finally repealed.

Then came the American Dream Down payment Initiative(ADDI - 2003), which essentially made loan qualification, credit checks and other standard procedures when lending money for home mortgages, a form of discrimination. It was then off to the races, the rest as they say is history.

Bush tried to reinstate regulations and increase real capital margins in 2003 and McCain tried in 2005 to blow the whistle on this 'ponsie scheme' of home mortgages, but both attempts were blocked by Sen Dodd and Rep Barney Frank banking committee chairs in the respective Houses. In 2008, there were 18 additional instances of President Bush trying to call attention to the looming crisis before the financial system went off the rails -- But it was too late.

In the end it was all about massive liberal social engineering, the massive desire to get rid of financial controls which prevented home loans to unqualified people -- People that would have no chance of paying the loans back. Yep, illegals as well, bought sub-prime mortgage houses, most of which have hightailed it back over the border.

Well it has all came crashing down.

Mark Levin has more, from his show. But you can do your own research, it's all in the Congressional records.