Just how guilty are Fannie and Freddie for the financial crisis? Read Reckless Endangerment and decide.
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Yet the book doesn’t quite do that. It provides plenty of circumstantial evidence: Fannie and Freddie owned the same model of gun that was used in the crime, they associated with known murderers, their recent behavior was alarming, and investigators found unexplained deposits in their bank accounts. And Morgenson and Rosner establish that, without a doubt, the crisis would have been less severe without Fannie and Freddie’s influence.
The difficulty is proving a negative: incomprehensible assets backed by toxic mortgages would not have brought Wall Street down without Fannie and Freddie’s influence. It’s possible, even likely, but extremely hard to prove beyond a reasonable doubt.
Of course, Reckless Endangerment makes it seem likely that the large market for subprime loans wouldn’t have existed without the GSEs. Morgenson and Rosner demonstrate that, for instance, Countrywide Financial—one of the most abusive lenders—was “at heart a Fannie Mae clone,” with its CEO, Angelo Mozilo, enjoying an extremely close relationship with James Johnson.
Yet regardless of who is to blame for the crisis of 2008, Reckless Endangerment powerfully undercuts the progressive narratives about economic growth and social advancement, as well as explanations for the financial crisis. The idea that concentrated government can be directed toward specific societal goals has been irrevocably shaken. There is no denying that, in one decade, progressivism’s brightest lights decided to increase homeownership using the tools of power, and then, in the next decade, they were co-opted by rent-seekers and the housing market was utterly destroyed. In the end, regardless of who pulled the trigger of the gun, it was progressives who ordered the hit.