Posts Tagged ‘bailouts’

The Great Read-cession, Part III

Reckless Endangerment

We’re up to Part III of John’s breakdown of the books of the financial crisis. Click here for Part I, and here for Part II.

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

by Gretchen Morgenson and Joshua Rosner, 2010

 

Reckless Endangerment is one of a specific subgenre of financial crisis literature, which might be called the “Blame X” genre. Human nature being what it is, there is a lot of demand for books that find someone or something to blame for the whole ordeal.

Reckless Endangerment’s targets are Fannie Mae and Freddie Mac, the government-sponsored entities (GSEs hereafter) designed to aid the housing market, and specifically Jim A. Johnson, the CEO who brought Fannie Mae to new heights (or depths, depending on your perspective). Morgenson and Rosner lay almost all the blame for the financial crisis on Johnson’s reckless efforts to expand Fannie’s market share: “A Pied Piper of the financial sector, Johnson led both the private and public sectors down a path that led directly to the eventual crisis of 2008.”

The GSEs are frequent targets of this kind of criticism, and for good reason: The bailouts of Fannie Mae and Freddie Mac created by far the biggest losses of all the government bailouts of 2008-09: The costs have already exceeded $180 billion and could reach $363 billion (conversely, Treasury claims to have actually profited on TARP*). And they were terribly run companies before that: In 2004, they were charged with massive accounting irregularities that led to the resignation of their CEO, and several executives were implicated in the “Friends of Angelo” bribery scandal.

*Though those claims should be taken with a grain of salt, as we’ll see later.

Morgenson’s book does a thorough job of portraying the extent and nature of corruption that was almost inherent to the GSEs. Particularly appalling is the incestuous relationship between the companies and the government. The entire concept of a “government-sponsored enterprise” sounds almost Orwellian: The institutions were created as government agencies* during the New Deal, but Lyndon Johnson partially privatized them, in what was essentially an accounting gimmick, when costs related to the Vietnam War made government expenditures look bad. Continue reading

The Great Read-cession: Books of the Financial Crisis

It's been five years since Lehman's demise

Introduction

 

Sometime during 2011, essentially on a whim, I decided that I wanted to read every book written on the subject of the financial crisis of 2007-08.

What would motivate someone to undertake such a project? Eh, who knows why people do the things they do? As far as I can remember, I had two main motives: one general and one specific.

Generally, I’ve always had a vague desire to pick one subject and just read everything I could about it. Whenever I read a work of nonfiction, no matter how good or thorough it is, I have this feeling that I’m only getting some of the story. I’m only seeing reality as filtered through the author. The stories told are the ones the author found interesting; the opinions featured are the ones of this writer’s sources; the quotes are the ones he happened to write down. Even the most evenhanded and objective writer retains some biases, if only due to the natural limitations on research and reporting. When I read nonfiction, I always feel keenly aware of this. As a result, a book that’s supposed to inform me often ends up highlighting what I still don’t know.

This problem doesn’t really have a solution—nobody can be a firsthand witness to everything—but reading the same story multiple times is at least a better approximation of reality than reading it just once. After all, the police don’t stop the investigation after interviewing one witness. Of course, there’s a reason most people don’t read this way: It is, by design, very, very repetitive. You’d end up reading slightly different versions of the same story over and over again, intentionally making a leisure activity less fun.

Nevertheless, the cumulative nagging of years of nonfiction motivated me to at least try this method once. No matter the subject, I felt like the experiment would at least give me a better sense of the systemic biases of nonfiction.

Which brings me to the specific reason of why this subject. Continue reading

Monday Medley

What we read while not searching for sugarman . . .