June 3, 2011


Gretchen Morgenson & Joshua Rosner, Reckless Endangerment: How Outsized Ambition, Greed, And Corruption Led to Economic Armageddon (New York: Times Books/ Henry Holt, 2011) ("Reckless Endangerment is an economic whodunit, on an international scale. But instead of a dead body as evidence, we have trillions of dollars in investments lost around the world, millions of American jettisoned from their home and fourteen million U.S. workers without jobs. Such is the nature of this particular crime." Id. at xiv. "The good news was 2003 was a banner year for mortgages. The bad news--for Wall Street anyway--was that the blistering pace simply could not continue Mortgage originations had been propelled by the Fed's rate cuts, but with prevailing rates at 1 percent, there was little room for further declines. This was meaningful because borrowers who had reached for more home than they could afford would no longer be able to lower their costs by refinancing when rates fell again." " As 2004 dawned, therefore, it had become more and more evident that the mortgage lending machine was sputtering . . For all of 2004, only $276 billion in mortgage0backed securities were issued, fully 40 percent less than the amount sold a year earlier." "Wall Street bankers were desperate to halt the decline in mortgage volume, which spelled disaster for bonuses and even presaged the unthinkable: layoffs." "It was a moment of truth for Wall Street, an industry not known for veracity. The firms that had made so much money on the American dream of homeownership were faced with a decision. Recognizing that the easy money days were over, the firm knew that continuing down the path of big mortgage profit was going to require a more concerted effort, greater creativity. Wall Street, always at the ready for such duty, concocted new types of loans to be offered to borrowers as well as new entities that would but them." "But keeping the mortgage machine humming would also require that investment banks ignore numerous signs of wrongdoing along the way, This meant putting their own interests ahead of their clients' at every turn." "While nobody mistook Wall Street banks for charity organizations, the degree to which these firm s embraced and facilitated corrupt mortgage lending was stunning. Their greed and self-interest took the mortgage mania to heights (or depths, depending on your view) it could not possibly have reached without Wall Street's involvement, And in so doing, Wall Street helped propel world financial markets to the brink of collapse." "The voraciousness of these firms would also push the nation's economy into its most serious recession in more than seventy-five years. Their avarice would finally, and forcefully, demonstrate how a noble idea like homeownership could be corrupted into something that so poisoned the global economy it was left in a semi-vegetative state." Id. at 273-274. See also Robert B. Reich, "Getting Away With It," NYT Book Review, Sunday, 5/29/2011.).