Pinning the blame on Fannie Mae
In Reckless Endangerment, Gretchen Morgenson and Joshua Rosner reveal how James Johnson enriched his friends and himself by flooding the market with risky subprime mortgages, said David Brooks in The New York Times.
The New York Times
Looking for someone to blame for the 2008 economic meltdown? asked David Brooks. It all started with Fannie Mae, the government-backed mortgage giant, and its former chief executive James Johnson. In a well-reported new book, Reckless Endangerment, Gretchen Morgenson and Joshua Rosner reveal how Johnson, a “Democratic sage with a raft of prestigious connections,” enriched his friends and made $100 million for himself by flooding the market with risky subprime mortgages.
Dispensing with the usual criteria for making loans, Fannie handed out billions in federally guaranteed dollars like candy, and “helped spread risky behavior and low standards across the housing industry.” Johnson and his cronies paid themselves lavishly, and used Fannie funding to lobby congressmen, falsify academic research, and suck in “reputable figures’’ such as Bill Daley, Ken Starr, and Larry Summers to defend Fannie’s scam.
In the end it all crashed—bringing big banks, Wall Street, and the entire economy down with it. Yet Johnson and the other power players skated away, blameless. “This is how Washington works.’’ Is it any wonder there’s such a growth market for angry populism?