Editor: David Reiss
Brooklyn Law School

November 16, 2013

A Review of “Reckless Endangerment”

By Gloria Liu

The 2008 Financial Crisis and subsequent fall of Lehman has been a recent point of fascination. HBO released its acclaimed “Too Big to Fail”; Kevin Spacey starred in “Margin Call”; even Michael Douglas’ “Wall Street” saw a revamp with a sequel starring Shia LaBoeuf. In the academic sphere, the crisis has certainly been susceptible to hindsight bias but has also been analyzed from many different angles and approaches. In “Reckless Endangerment,” esteemed journalist Gretchen Morgenson teams up with Joshua Rosner to tell the little-known story of Fannie Mae and its large role in the subprime mortgage crisis. By using its special government backing, Fannie Mae, a private company, dominated the mortgage market and became the nation’s second-largest debt issuer.

At the heart of the story is James Johnson, Fannie Mae’s chief executive in the 1990s. Morgenson, in some sense “pierces the corporate veil” by exposing the faces behind the corporation. Humanizing the corporation, in such a manner, only serves to prove that the Financial Crisis was not one created in the abstract, but one created by people in a whirlwind of greed.

Morgenson argues and narrates how Johnson persuaded Congress to maintain Fannie Mae’s implicit government backing and fought off any governmental regulation. She traces the relationships he forges to further the interests of Fannie Mae. Notably, she mentions Georgia’s Fair Lending Act and its failed attempt at curbing predatory lending and how Johnson contributed to its demise. The tale would be incomplete with honorable appearances by players like CountryWide Financial, National Finance Corporation, NovaStar, KB Home and the infamous REMIC transaction.

As an introduction to understanding the subprime mortgage crisis, “Reckless Endangerment” is an entertaining read. Morgenson successfully makes an otherwise dry story of self-interested corporate interests, into a riveting tale filled with drama fueled by the unique personalities of the men sitting behind the scenes. Still, Morgenson’s agenda is very apparent creating an underlying tone of skepticism at Washington’s attempts to promote homeownership as the ultimate achievement of the American Dream.

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