As Wall Street bonuses bulged and housing prices were peaking in 2005, Daniel Mudd found himself dreading his job as chief executive of Fannie Mae.
The nation’s largest provider of mortgage financing was under assault, as authors Bethany McLean and Joe Nocera show in “All the Devils Are Here: The Hidden History of the Financial Crisis.” Subprime mortgage originators had eroded Fannie’s lock on the secondary mortgage market, investors were on edge, and the Bush administration was pushing it to guarantee yet more loans for low- and middle-income Americans.
So Fannie waded into the subprime market, helped inflate the housing bubble and ultimately landed “the mother of all bailouts.” The truly sad thing is that none of this really helped low-income Americans to buy homes, McLean and Nocera say.
“What was the point of it all?” they ask, citing evidence that only 9 percent of subprime lending between 1998 and 2006 went to first-time home buyers. “The rest were refinancings or second home purchases,” and foreclosures soon wiped out ownership gains made during the bubble.
What emerges in these pages is a detailed and scrupulously balanced account of how the Great Recession bubbled up from decades of government housing goals, financial engineering, craven lawmakers, ignorant homebuyers, sleazy subprime lenders and arrogant Wall Street executives.
McLean, who writes for Vanity Fair, and Nocera, a New York Times columnist, have arrived late for the subprime party. Yet the authors succeed in pulling the jumbled pieces of the financial crisis together and showing how it flowed from human foibles ranging from Hank Greenberg’s autocratic rule at American International Group Inc. to Merrill Lynch CEO Stan O’Neal’s suspicions of everyone around him.
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Repost Via Star Tribune
Video Via The Daily Show
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