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The Spectacle Blog

Brooks on Reckless Endangerment

By Joseph Lawler on 6.17.11 @ 10:23AM

Another ringing endorsement for Gretchen Morgenson and Joshua Rosner's Reckless Endangerment, this time from David Brooks:

For that reason, the Fannie Mae scandal is the most important political scandal since Watergate. It helped sink the American economy. It has cost taxpayers about $153 billion, so far. It indicts patterns of behavior that are considered normal and respectable in Washington.

...

Most of the people were simply doing what reputable figures do in service to a supposedly good cause. Johnson roped in some of the most respected establishment names: Bill Daley, Tom Donilan, Joseph Stiglitz, Dianne Feinstein, Kit Bond, Franklin Raines, Larry Summers, Robert Zoellick, Ken Starr and so on.

Of course, it all came undone. Underneath, Fannie was a cancer that helped spread risky behavior and low standards across the housing industry. We all know what happened next.

The scandal has sent the message that the leadership class is fundamentally self-dealing. Leaders on the center-right and center-left are always trying to create public-private partnerships to spark socially productive activity. But the biggest public-private partnership to date led to shameless self-enrichment and disastrous results.

Brooks reads Reckless Endangerment as an indictment of the establishment (and especially of former Fannie CEO and Democratic Party insider James Johnson and Rep. Barney Frank, who are the only two people who Brooks writes are depicted as "egregiously immoral" in the book). Brooks is not usually one for stinging criticisms of D.C. insiders.

View all comments (7) | Leave a comment

JP| 6.17.11 @ 10:48AM

The collapse of the real estate markets is something that will linger for a decade or more. Litterally trillions were wiped out. Currently the Federal Reserve Bank holds half of trillion dollars in TARP assets it purchased. And these assetts are losing value every month. There is no way anyone will buy these properties off the Fed.

To make matters worse, the first of 76 million Baby Boomers are retiring. That's almost 25% of the population. Even without the mortgage collapse of 2008, the US would be seeing a problem with excess real estate inventories. Outside of demolishing these properties there isn't much that can be done. The 2010 Census indicated that our population grew at the slowest pace since the Great Depression. And the fastest growing demographic doesn't have the income to buy into the housing and real estate markets. Some places will continue to decay (ie Detroit), while others will see substantial growth (namely Texas). But all in all, when the dust does settle, we will see that our housing inventories are way too large. Great for buyers, disaster for sellers. In May, national housing prices slid below the 2000 levels. Many experts say that 20 years of housing equities will have to be lost before a recovery begins. Not far from where I live, a new house that sold for $310,000 in 2006 is now on the market for $165,000. That's got to hurt. Some predict that the 30 year fixed mortgage will go by the wayside, as most banks and lenders get out of real estate entirely.

Teflon93| 6.17.11 @ 11:57AM

What part of $138 billion do Americans not understand? The Fannie/Freddie bailouts---which are ongoing mind you---will dwarf every other bailout in this crisis.

And Fannie and Freddie are trying to reinflate the housing bubble at this very moment.

timb| 6.17.11 @ 4:51PM

The last sentence says everything you need to know about the entire comment. "An inflating housing bubble..." when housing prices have fallen for 10 months in a row. nice analysis

Rick V.| 6.17.11 @ 12:14PM

Barney Frank, "egregiously immoral"? Go figure.

Bob Grant| 6.17.11 @ 12:44PM

I'm no second coming of Milton Friedman but with long term, stable (i.e. manufacturing) jobs exiting the country primarily due to Big Labor wage inflation, coupled with NGO's handing out mortgages like crack, what were we to expect?

Whomever the republican candidate will be, he/she needs to educate the public on how we really got into this mess and leave no culprit unmentioned (got that GWB?).

KennesawJack| 6.17.11 @ 12:54PM

What are the odds Johnson and Frank will be called to task for this mess? Zip. Zero. Nada.

timb| 6.17.11 @ 4:53PM

well, a former Forbes campaign worker just did write a book on them and David brooks just denounced them -- ridiculously -- from the pages of the most prestigious newspaper in America, but otherwise?

Sadly, no public hanging will occur to satiate your [misplaced] blood lust, Jack.