Fannie, Freddie and Barney.

Grechen Morgensen and a co writer have produced yet another book on the causes of the financial meltdown.  This story is well known by now but what's most interesting  most disgusting is the lack of interest in the subject on the part of the so-called MSM in this country.  Corruption, when practiced by democrats, is apparently just fine as long as it is in the good cause of,  a) ensuring their idea of fairness, b) sticking it to republicans, c) redistributing wealth, and d) growing the size of government.

IN THE WASHINGTON POST, JOHN TAYLOR REVIEWS Gretchen Morgenson & Joshua Rosner’s Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. Excerpt:

While many economists — including this reviewer — have argued that government actions caused the crisis, Morgenson and Rosner use their investigative skills to dig down and explain why those actions were taken. To avoid reckless policies in the future, we need to understand their causes, and the authors’ identification of government-industry links deserves careful consideration by anyone interested in improving the economy. . . .

The book then gives examples where Fannie’s executives — Jim Johnson, CEO from 1991 to 1998, is singled out more than anyone else — used the excess profits to support government officials in a variety of ways with plenty left over for large bonuses: They got jobs for friends and relatives of elected officials, including Rep. Barney Frank, who is tagged as “a perpetual protector of Fannie,” and they set up partnership offices around the country which provided more jobs. They financed publications in which writers argued that Fannie’s role in promoting homeownership justified federal support. They commissioned work by famous economists, such as Nobel Prize-winner Joseph Stiglitz, which argued that Fannie was not a serious risk to the taxpayer, countering “critics who argued that both Fannie and Freddie posed significant risks to the taxpayer.” They made campaign contributions and charitable donations to co-opt groups like the community action organization ACORN, which “had been agitating for tighter regulations on Fannie Mae.” They persuaded executive branch officials — such as then Deputy Treasury Secretary Larry Summers — to ask their staffs to rewrite reports critical of Fannie. In the meantime, Countrywide, the mortgage firm led by Angelo Mozilo, partnered with Fannie in originating many of the mortgages Fannie packaged (26 percent in 2004) and gave “sweetheart” loans to politicians with power to affect Fannie, such as Sen. Chris Dodd of Connecticut. The authors write that “Countrywide and Fannie Mae were inextricably bound.”

It’s interesting to me that there has been so little law enforcement — or journalistic — interest in the rampant corruption relating to these institutions’ collapse.

CRA -- The Real Culprit in the Great Financial Meltdown

Edward Pinto, the author of this article, was the chief credit officer at Fannie Mae during the 1980's.  It should be noted that the federal law creating the CRA (Community Redevelopment Act) occurred in 1977 during the Carter Administration.  A thorough re-write of the history and effectiveness of this law has been going on by various official spokespeople for the government and institutions involved in the great financial meltdown of the last few years.  Pinto attempts to set the record straight in this article and since he was an official at Fannie Mae prior to the ramping up of the CRA during the Clinton years, he clearly has a bird's eye view of what has gone on.  This is aother piece of evidence that the whole CRA exercise was the root cause of the meltdown and remains unacknowledged by those involved to this day.  Clinton administration officials and all their enablers in the Congress are most complicit in this fiasco and should be called out for their roles.  This horrific crises did not need happen.  However, it did and is proof positive that government social engineering and meddling in the workings of the free market always leads to disaster.  Since there has been no attempt at accounting here, we can be assured that the whole sordid affair will be repeated.

Added 2/23/10:  Thomas Sowell today adds another comment to the many, including his book, he has contributed to this subject over the past few years here.  What's worrisome about his observation is the thought that many of the easy credit and permissive financing schemes that brought about the meltdown are being repeated.

Added 4/21/10:  This WSJ article here clearly anoints the real culprits in the financial meltdown: the government GSEs, Freddie and Fannie, and in this article he tells us why and how the Republicans were unable to put in place reforms that would have limited if not prevented this catastrophe.

ADDED: 5/23/10:  Andrew Cuomo, another flaming liberal like his father, now aspires to the Governor's seat in New York, a very blue state where his father was Governor in 1984.  Cuomo was the Secretary of HUD in the Clinton administration and was responsible for some terrible policies that opened the floodgates on sub-prime mortgages which overwhelmed the system and led to the financial meltdown we are still trying to recover from. Cuomo was in his 30's when he held the HUD position, had the usual career politician's experience in business, which is to say none, and as one can see from this article, he made some very bad decisions and choices in that job.  Since he was in a democrat party administration there were no adults to advise or reign him in, so we live with the consequences.  It would be nice to believe that his disastrous time in the HUD job will haunt him and relieve the people of New York of his services in the future, but that will not happen.  The corrupt media will not mention his horrible record, or if they do they'll blame it on Bush or someone else, and New York will suffer through yet another Cuomo regime.  Too bad.  Read all about his shenanigans at HUD here in some super reporting by Wayne Barrett of the Village Voice, published in August '08.

ADDED: 9/20/10:  This particular video tells the full story about the run up to the financial crises with sub-prime mortgages that led to the meltdown in '07/'08.  It's all here, in this You Tube video.  Note how over and over in Congressional committee meetings responsible Republicans warned, cajoled, and fought for reforms of Freddie and Fannie, and how repeatedly all Democrats pooh-poohed their concerns and refused any changes in the regulation of these out-of-control GSEs.  This is one of the greatest scams and politically induced frauds surely sine the Teapot Dome debacle in the Harding administration and maybe ever.  The behavior of the representatives who enabled Frank Raines and all the other democrats who feasted on the bonuses paid out by these GSEs for years, should be the target of criminal investigations at some point in time.  If their were Republicans involved, and there may have been a few, in this fraud, they should be investigated as well.  Democracies cannot survive when the political class is directly involved in fraud of this nature.  Hopefully the election this Fall will clean out some of this detritus and allow us to move forward with policies that make sense.  What a crying shame all of this is.