New York Times business correspondent Morgenson (The Capitalists’ Bible, 2009, etc.) and investment consultant Rosner combine their expertise in a fresh look at the causes of the 2008 mortgage meltdown.
“Will a debacle like the credit crisis of 2008 ever happen again?” ask the authors, answering, “most certainly.” They put a heavy blame on Congress, which failed to fix the problem when it could and now remains silent on how to resolve the insolvent mortgage agencies. They also set out to identify the “powerful people whose involvement in the debacle has not yet been chronicled” (many of whom are still active), and the “key incidents that have seemed heretofore unrelated.” Morgenson and Rosner focus on the ties between government and private finance through James A. Johnson, chief executive officer of Fannie Mae from 1991 to 1998, and from 1999 to the present, a director at Goldman Sachs. Johnson transformed Fannie Mae into a political force and lobbying influencer, a strategy that “would be mimicked years later” by Countrywide Financial, Goldman Sachs, Citigroup and others, and by Bill Clinton's Secretary of the U.S. Treasury Robert Rubin. The authors show how changes in law and regulation unnoticed at the time—Sen. Chris Dodd’s amendment to the 1991 FDICIA Act, Alan Greenspan’s 1992 ending of Federal Reserve oversight of primary dealers, further regulatory changes in 2001—paved the way for the multitrillion-dollar disaster. The final chapter retraces the crisis and shows how the New York Fed and Fed Reserve tried to downplay what was becoming evident to some of its own makers.
Extremely timely given growing fears about the possibility of another financial crash.