THE MORTGAGE WARS

Gagged until a civil suit was finally dismissed in 2012, former Fannie Mae CFO Howard lays bare for the first time how the agency was undermined, and its executive leadership framed, by a confederation of political opponents.

The author was initially charged with deliberately falsifying financial reports. His explosive account traces behind-the-scenes activity beginning around 1998. He describes a bipartisan league of free market ideologues, political hatchet men operating as financial regulators, and major business and corporate interests eager to privatize Fannie Mae's mortgage business for their own benefits. The agency had always been a target of free market critics, but now, Howard writes, the objectives were different. Their aim was to change the terms on which the agency conducted its business, undermine its contribution to financial stability through recycling the trade deficit, and ultimately put the agency into receivership. This was finally achieved under Secretary of the Treasury Henry Paulson in 2007. In Howard’s view, ideological and political obsessions with Fannie Mae's charter and financial importance significantly blindsided public officials, contributing to the outbreak of the 2008 financial crisis. Howard contends that the fact that Fannie Mae came back after the crisis, reassuming its role as one of the major issuers of mortgage debt, shows that the agency's private-sector opponents were wrong throughout. The author presents a different view of the origins of the mortgage crisis, showing its roots in an earlier subprime crisis that had erupted in the 1990s. He contends that private mortgage lenders were the ones who lifted the most basic credit-qualification standards from borrowers and that they compounded their blunders with offerings of financial derivatives, which miraculously transformed the lowest quality of mortgage debt into AAA-rated securities.

An essential contribution to understanding the roots of our most recent financial crisis, enriched by a deeper review of the history of American home financing.