How greed and oversized ambitions led to the biggest housing crisis in America

Reckless Endangerment chronicles the growth of the housing bubble which has brought the American economy to the brink of a meltdown. The authors are Gretchen Morgenson, a Pulitzer Prize winning business reporter and columnist at the New York Times, and Joshua Rosner, a housing finance expert. Between them, they showcase the monstrous growth of Wall Street Banks, Washington and the two government sponsored enterprises — Fannie Mae and Freddie Mac. The book traces the collapse which began in the mid- 1990s with a misapprehension that greater housing at all costs is good social policy. In order to promote this policy, the Clinton administration encouraged a partnership between the private sector and Fannie Mae & Freddie Mac. With support from the government, the book claims that the then CEO of Fannie, James A. Johnson, gifted himself and his executives a huge cut of that public money. A third of the subsidy which ideally should have been passed onto home owners was pocketed by Fannie, said a 1996 report by the Congressional Budget Office. Johnson got an astounding sum of $100 million and his successor, Franklin D. Raines also enjoyed similar perks. Chunks of the money made were transferred to Members of Congress and generous donations made for election campaigns. So what began as a noble idea had transformed into a monster, which ate away public money for over 15 years. Lenders unwittingly kept handing these financial behemoths billions of dollars which were ultimately used to benefit themselves. And basking in reflected glory were the Wall Street banks, sub-prime lenders and politicians. The book talks of how these different establishments were rotating funds and benefits among themselves. This Revolving Door Theory is the backbone of the book and has been exhaustively researched. But one drawback of the book is that it talks mainly about this concept, which is but one of the many factors that led to the collapse. The strength of the book is that it names the offenders of the housing scandal (though fails to name some key players), lauds the people who issued warnings about the forthcoming storm and effectively brings out the anger and frustration of the home owners. All in all, it’s an informative book and definitely worth a read.