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Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon
Gretchen Morgenson and Joshua Rosner
By
Published: Jun 01, 2011
Category:
Non Fiction
In 2010, Goldman Sachs decided not to fight government accusations that it had misled investors who bought one of its mortgage securities — it paid a fine of $500 million. Although that’s just a rounding error on Wall Street, the number gets our attention. What should make us stand up and scream was just dissected in The New York Times: That deal was one of about two dozen similar Goldman deals, totaling $10.9 billion, and yet the SEC could find only a single Goldman employee to investigate, “a midlevel 28-year-old Frenchman who was little known not just outside Goldman but even inside the firm.”
Heck of a job, SEC!
If you read the Times Business section regularly — especially on Sunday — one of the authors of this piece should be familiar to you. She’s Gretchen Morgenson, the scourge of Wall Street. Pity she didn’t go to law school and become a prosecutor. Despite the spectacular lack of government interest in sending anyone in a Wall Street C-suite to jail, she would have found a way to give men “too big to fail” an awkward gap in their careers. Instead, she’s had to make do with a Pulitzer.
[Disclosure: I worked, very briefly, with Ms. Morgenson two decades ago. I have suggested the occasional story and source to her. One of my best friends is a friend of hers. And I think what she practices is one of the most exalted forms of journalism — when she’s in the paper, I read her before I read about the Yankees.]
Now, with Joshua Rosner, Gretchen Morgenson has written a book. The title is exactly what you’d expect: "Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon." It’s the whole story, from the beginning. You’ll meet a lot of unindicted bankers whose names you rarely see in this context. And you’ll get a blistering, unsurprising conclusion:
Just as drug lords know that their products pose hazards to their customers, the Wall Street firms packaging and selling mortgage pools to investors knew well before their customers did that the loans inside the securities had begun to go bad…
Wall Street was supplying money to companies making increasingly poisonous loans to people with no ability to repay them. And the firms knew exactly what they were doing.
And then Morgenson and Rosner go on to name the biggest offenders: Bear Stearns, Merrill Lynch, Lehman Brothers, Deutsche Bank, Greenwich Capital, Morgan Stanley and Goldman Sachs.
You may think, because you have seen Inside Job, that you have a grasp of what happened. Yes and no. “Reckless Endangerment” is even more infuriating, for it takes you back a decade or two to the origins of the subprime bubble. Don’t be surprised to find that the dream of universal home ownership, blended with the grimy reality of greed and ambition, made a few people rich. [To buy the book from Amazon, click here. For the Kindle download, click here.]
There is a problem with this book, and it’s not the fault of the authors. It’s the subject, especially Fannie Mae. The first third of the book is technical in the extreme. It cannot be read with pleasure, or, for this reader, with much understanding. Don’t blame yourself, don’t think you’re stupid. Just skim and skip until you’re into material that sends your blood pressure racing.
There’s an old Newsweek phrase: “arrows to toyland.” It means that the really great stuff is at the end of the piece. To let the reader know this, the writer puts some “arrows” — a summary of what lies ahead — near the beginning. This book lacks those arrows. But it’s got a fantastic toyland.
