- Columns - Current and Archives
- Looking Back by Jack Lebo - February 2012 >
- Murphy's Law - July 2013>
- Murphy's Law - May 2013
- Murphy's Law - April 2013
- Murphy's Law - March 2013
- Murphy's Law - February 2013
- Murphy's Law - January 2013
- Murphy's Law - December 2012
- Murphy's Law - November 2012
- Murphy's Law - October 2012
- Murphy's Law - September 2012
- Murphy's Law - August 2012
- Murphy's Law - July 2012
- Murphy's Law - June 2012
- Murphy's Law - May 2012
- Murphy's Law - April 2012
- Murphy's Law - March 2012
- Murphy's Law - February 2012
- Murphy's Law - January 2012
- Murphy's Law - December 2011
- Murphy's Law - November 2011
- Murphy's Law - October 2011
- Murphy's Law - September 2011
- Murphy's Law - August 2011
- Murphy's Law - July 2011
- Murphy's Law - June 2011
- Murphy's Law - May 2011
- Your Money Matters by Thomas Sottile - February 2013>
- Taking Care by Lisa Petsche - May 2013>
- Taking Care - April 2013
- Taking Care - March 2013
- Taking Care - February 2013
- Taking Care - January 2013
- Taking Care - December 2012
- Taking Care - November 2012
- Taking Care - October 2012
- Taking Care - September 2012
- Taking Care - August 2012
- Taking Care - July 2012
- Taking Care - June 2012
- Taking Care - May 2012
- Travel Articles
- There's Much To Like About Tybee Island, Georgia
- PA’s Little Town Of Bethlehem Has Giant History, Pleasant Surprises
- Savannah Style: History, Food, Architecture And Even Ghosts
- Vacationing Beats Back Winter
- Visiting The Inn At Pocono Manor
- Delights of Northern Ireland
- Tuscana Resort near Orlando
- Belfast To Commemorate Titanic
- Protect Your Home While Vacationing
- Nearby Hampton Roads, Virginia
- New 'Heritage' Travel Division Formed
- Lifestyle Articles
- PAE-300 ‘Personal Audio Enhancer’ Brings New Sounds And Clarity To Television
- Seniors Desire To Stay In Home Has Led To Innovative Housing
- ‘Pleasantly Plump’ May Not Pose Serious Health Problems After All
- Spring Hills Brings Home Care, Assisted Living to S. Jersey
- Sense Of Family Obligation Remains Strong
- Becoming Bilingual Thought To Delay Onset Of Cognitive Impairment
- Comprehensive Study Provides Foundation For ‘New American Diet’
- Is Alzheimer's A Myth?
- Living Alone, Without Loneliness
- Chocolate In Moderation
- Expert: Forgiveness, Gratitude Are Essential For Healthy Aging
- Expert: No Limit To Length Of Life
- Media-Based Pennsylvania Veterans Museum Is Historic Treasure
- Joint Task: Take Action To Combat Knee Pain
- Want Better Performance From Portfolio? Watch Congress
- Conscientiousness Key To Longevity
- Men, Women 'Retire' Differently
- Sleep Problems And Cognitive Issues
- Newsworthy
- Binge Drinking Is A National Problem — Even With Senior Citizens
- Study Warns Of High Cardiovascular Disease Risks Of Eating Yolks
- Study: 'Old' People Smell Better
- Depression, Anxiety Are Key Factors In Impact Of Parkinson’s Disease
- Study: Don’t Worry, Be Happy For Better Cardiovascular Health
- ‘Chore Connection’ Provides Unique Services, Volunteer Opportunities
- Study Reinforces Benefits Of Regular Colonoscopies
- Study: 'Senior Moments' Begin Earlier
- Three New Studies Suggest Aspirin May Prevent Some Cancers
- No Sure Bet: Seniors Must Recognize Potential Gambling Problems
- Coping With Grief
- New Recommendation Creates Debate Over Prostate Screening
- High Salt, Low Potassium Diet Linked To Increased Death Risk
- Medical Director At HCR ManorCare Receives APPLE Award
- RomneyCare Awful Lot Like Obamacare
- Grandkids Safer With Gram/Pop At Wheel
- AARP: Recession Hits Seniors Hard
- Antidepressants Can Increase Danger of Falling
- Poll: Low Marks For U.S. Healthcare
- More Good News For Coffee Drinkers
- Book Reviews
- We The People
- The Immortal Life Of Henrietta Lacks
- The Love Of My Youth
- The American Way Of Eating
- ‘Rin Tin Tin’
- Pity The Billionaire
- Classic: Uncle Tom's Cabin
- A Stocking Full Of New Christmas Novels
- When China Rules The World
- The Submission - Amy Waldman
- My Soul's Been Psychedelicized
- Reckless Endangerment
- O'Nan's 'Emily Alone'
- Baseball In The Garden Of Eden
- Leisure / Entertainment
- Music - Donald Fagen's 'Eminent Hipster,' Jimi Hendrix Release
- Music - Two CD-Set Features Elvis In Hawaii; Eric Burdon Has New Release
- Music - Billy Joel's 'Love Songs' Set For Release
- Music - Paul Anka Shows Off His Versatility With Compilation CD Of ‘Duets’
- Music - Elvis, Otis Redding Fans Treated To Compilation Sets
- Music - Even At Age 80, Willie Nelson Flaunts Staying Power With Duets Album
- Music - New 63-CD Set Spans Much Of Johnny Cash's Career
- Music - Preservation Jazz Hall Band Celebrates Anniversary
- Music - New Releases Spotlight Garfunkel, Los Lobos
- Music - Television Pioneer Ernie Kovacs Featured In Two New DVD Releases
- Music - Simon’s ‘Graceland’ Album Celebrated With Anniversary Release
- Music - New Releases of Hathaway, Heart Music
- Music - Willie Nelson Still Producing New Music
- Music - New Release of Elvis' Work
- Music - 'The Sound Of Philadelphia'
- Music - Dave Brubeck, Hank Williams Reissues
- Music - Janis Joplin Showcased On 2 New CD Releases
- Music - Paul Simon, Jimi Hendrix Reissues
- Legal Articles
- Adult Children May Be Left To Pay Nursing Home Costs Of Indigent Parents
- Make A Resolution That Provides Long-Term Security
- Dialogue Helps Control And Direct Legal, Financial & Medical Matters
- Life Changes Can Require Revisions, Updates To Estate Plan
- Wills Create Solid Foundation For Effective Estate Planning
- Keep Or Shred? Know What To Do With Personal, Financial Records
- Recent Court Ruling Makes It ‘Open Season’ On Adult Children In PA
- Assuring For Care Of Your Pet
- Reader Resources
- Links To Government and Social Services
- Senior Discounts / bradsdeals.com
- For Advertisers / 2013
- To Subscribe
- Contact Us
- Submitting Letters To The Editor
Book Points Fingers At Those With Roles In Financial Collapse
By Barbara Murphy
Contributing Writer
The financial crash of 2008, which produced the first Great Recession and may produce a second, was not the work of faceless, malevolent economic forces over which we have no control.
It was the work of greedy human beings who have names and faces. They are identified — many for the first time publicly — in the book “Reckless Endangerment” co-authored by Gretchen Morgenson, Pulitzer Prize-winning financial writer for the New York Times, and Joshua Rosner, partner at an independent research consulting firm.
What follows is my partial list of those identified in the book as having played a major role in creating the financial crisis that devastated IRAs and 401k retirement savings accounts and caused millions of Americans, many of them seniors, to lose their homes.
First on the list is Bill Clinton. He gets first place for launching the National Partners in Homeownership program, a private-public cooperative whose goal was to greatly increase the number of homeowners across America. The partnership planned to do this by enabling poor Americans to get mortgages they ultimately could not afford.
The Partners’ strategy in achieving its goals, according to the authors, included “expanding creative financing, and simplifying the home buying process.” President Clinton ignored warnings from a number of economic experts that the plan would lead to disaster because many low income Americans simply do not have enough money to buy and maintain homes and would be better off renting.
Second on the list is James A. Johnson, former chief director of Fannie Mae, the huge and powerful government-sponsored (but privately owned) agency set up in 1938 to help people buy homes in the Great Depression by subsidizing mortgages.
The authors said: “Under the direction of Johnson, Fannie Mae’s calculating and politically connected chief executive, the company capitalized on its government ties, building itself into one of the world’s largest and most powerful institutions.” This was largely achieved by buying up subprime mortgages provided to the poor and unsophisticated people who unfortunately lived in a country whose financial leaders proclaimed that housing prices would never go down.
Fannie Mae sold the mortgages to Wall Street firms who packaged them into securities and sold them to investors who should have been but were not sharp enough to take a hard look at what they were buying, instead of simply grabbing at something that was essentially toxic.
Third on the list is Barney Frank, the powerful Massachusetts Democrat, who was an ardent supporter of Fannie Mae. When asked if he wasn’t worried about people being financially ruined by buying houses they could not afford, Mr. Frank’s answer was “we’ll deal with that problem if it happens.” Ms. Morgenson and Mr. Rosner said “Frank was a perpetual protector of Fannie and those in his orbit were rewarded by the company.”
Number four is David Silipigno, founder of National Finance Corp., which in 1998 launched a successful home-equity loan securitization program through Bear Stearns. The latter hoped National Finance, a mortgage origination machine, could provide many layers of fees to Bear Stearns. Unfortunately, a world financial crisis triggered when the Russian government devalued its currency killed the dream. As investors panicked and moved to liquidate risky positions, Long-Term Capital Management, a large hedge fund, imploded. Taxpayer money was used to bail out this hedge fund.
When National Finance failed to produce the returns Bear Stearns contemplated, the latter sent investigators to go over National Finance’s “numbers.” According to the authors, Mr. Silipigno finally made a phone call to Bear’s investigators stating: “You can keep trying to reconcile the numbers but you can’t make them reconcile because they won’t.” The authors said Mr. Silipigno allegedly admitted to falsifying loan schedules and bilking Bear Stearns out of $5.6 million. When word of this got out, the authors said, bankers wondered how Bear could have done such a shoddy job of due diligence on National Finance. “Ten years later,” the authors said, “Bear’s shareholders would wonder the same thing, albeit on a much larger scale.”
Number five is former Senator Phil Gramm (R-Texas), who led a successful fight in Congress in 1999 to kill the Glass-Steagall Act, which since the 1930s had maintained a wall between regular banks and investment banks. “With Glass-Steagall dead and gone,” the authors said, “financial institutions were now free to grow large and extend their tentacles into the farthest reaches of both the nation’s and the world’s economies.”
Number six is former Federal Reserve board chairman Alan Greenspan, who opposed all regulation of financial markets, believing the markets would regulate themselves. He has since admitted he was wrong.
Number seven is Angelo Mozilo, co-founder and former chief executive of Countrywide Financial, at one time one of the biggest subprime lenders in the world. After the meltdown, he was sued by the SEC for insider trading and fined several million dollars. Reportedly, his company paid most of the fine.
Ms. Morgenson and Mr. Rosner have some lists of their own. Among these is a list of “feckless regulators.” This list includes Timothy Geithner, now U.S. Treasury Secretary; Greenspan; Frederic Mishkin, former Federal Reserve governor; and Andrew Cuomo, former Secretary of the Department of Housing and Urban Development (HUD), now governor of New York.
The authors said “friends of Fannie Mae” included former U.S. Treasury secretary Robert Rubin, known as the “master of deregulation;” former U.S. Treasury secretary Larry Summer; and Peter Orszag, senior economist on the Council of Economic Advisors.
Finally, the authors compiled a list of “doubters and those who pushed back,” in other words, the good guys.
Heading this list is Dean Baker, co-director of the Center for Economic and Policy Research, who co-authored with Ron Feldman, a 2002 paper warning that home prices were on an unsustainable trajectory that clearly indicated a housing bubble. When it burst, the paper warned, the impact would be disastrous.
Also on the good guy list is Marvin Phaup of the Congressional Budget Office (CBO), who scrutinized the finances of Fannie Mae and its sidekick, Freddie Mac, and concluded that the taxpayer subsidy they were getting was a poor use of government money. The authors said that Mr. Phaup’s report concluded: “the money these companies were reaping from their implied guarantees allowed them to distort the political process. Taxpayers were essentially, if unknowingly, handing the companies millions of dollars each year with which they [the companies] funded their protection game.” After the Phaup report was published, Mr. Phaup was asked to resign. However, his boss, June O’Neill (another good guy) vigorously defended his report before Congress. Mr. Phaup remained at the CBO, yet Congress ignored the report.
“Reckless Endangerment” does a lot more than name names of those involved in the crisis. It emphasizes just how corrupt our financial system and our political system are. There were a few good people who tried to stop this grand robbery of the country’s wealth, but there were thousands who participated in the crime and only a tiny fraction of them have been brought to justice.
*
(Reckless Endangerment, by Gretchen Morgenson and Joshua Rosner, published by Times Books-Henry Holt & Co., New York, NY, 331 pages; Retail price $30).
By Barbara Murphy
Contributing Writer
The financial crash of 2008, which produced the first Great Recession and may produce a second, was not the work of faceless, malevolent economic forces over which we have no control.
It was the work of greedy human beings who have names and faces. They are identified — many for the first time publicly — in the book “Reckless Endangerment” co-authored by Gretchen Morgenson, Pulitzer Prize-winning financial writer for the New York Times, and Joshua Rosner, partner at an independent research consulting firm.
What follows is my partial list of those identified in the book as having played a major role in creating the financial crisis that devastated IRAs and 401k retirement savings accounts and caused millions of Americans, many of them seniors, to lose their homes.
First on the list is Bill Clinton. He gets first place for launching the National Partners in Homeownership program, a private-public cooperative whose goal was to greatly increase the number of homeowners across America. The partnership planned to do this by enabling poor Americans to get mortgages they ultimately could not afford.
The Partners’ strategy in achieving its goals, according to the authors, included “expanding creative financing, and simplifying the home buying process.” President Clinton ignored warnings from a number of economic experts that the plan would lead to disaster because many low income Americans simply do not have enough money to buy and maintain homes and would be better off renting.
Second on the list is James A. Johnson, former chief director of Fannie Mae, the huge and powerful government-sponsored (but privately owned) agency set up in 1938 to help people buy homes in the Great Depression by subsidizing mortgages.
The authors said: “Under the direction of Johnson, Fannie Mae’s calculating and politically connected chief executive, the company capitalized on its government ties, building itself into one of the world’s largest and most powerful institutions.” This was largely achieved by buying up subprime mortgages provided to the poor and unsophisticated people who unfortunately lived in a country whose financial leaders proclaimed that housing prices would never go down.
Fannie Mae sold the mortgages to Wall Street firms who packaged them into securities and sold them to investors who should have been but were not sharp enough to take a hard look at what they were buying, instead of simply grabbing at something that was essentially toxic.
Third on the list is Barney Frank, the powerful Massachusetts Democrat, who was an ardent supporter of Fannie Mae. When asked if he wasn’t worried about people being financially ruined by buying houses they could not afford, Mr. Frank’s answer was “we’ll deal with that problem if it happens.” Ms. Morgenson and Mr. Rosner said “Frank was a perpetual protector of Fannie and those in his orbit were rewarded by the company.”
Number four is David Silipigno, founder of National Finance Corp., which in 1998 launched a successful home-equity loan securitization program through Bear Stearns. The latter hoped National Finance, a mortgage origination machine, could provide many layers of fees to Bear Stearns. Unfortunately, a world financial crisis triggered when the Russian government devalued its currency killed the dream. As investors panicked and moved to liquidate risky positions, Long-Term Capital Management, a large hedge fund, imploded. Taxpayer money was used to bail out this hedge fund.
When National Finance failed to produce the returns Bear Stearns contemplated, the latter sent investigators to go over National Finance’s “numbers.” According to the authors, Mr. Silipigno finally made a phone call to Bear’s investigators stating: “You can keep trying to reconcile the numbers but you can’t make them reconcile because they won’t.” The authors said Mr. Silipigno allegedly admitted to falsifying loan schedules and bilking Bear Stearns out of $5.6 million. When word of this got out, the authors said, bankers wondered how Bear could have done such a shoddy job of due diligence on National Finance. “Ten years later,” the authors said, “Bear’s shareholders would wonder the same thing, albeit on a much larger scale.”
Number five is former Senator Phil Gramm (R-Texas), who led a successful fight in Congress in 1999 to kill the Glass-Steagall Act, which since the 1930s had maintained a wall between regular banks and investment banks. “With Glass-Steagall dead and gone,” the authors said, “financial institutions were now free to grow large and extend their tentacles into the farthest reaches of both the nation’s and the world’s economies.”
Number six is former Federal Reserve board chairman Alan Greenspan, who opposed all regulation of financial markets, believing the markets would regulate themselves. He has since admitted he was wrong.
Number seven is Angelo Mozilo, co-founder and former chief executive of Countrywide Financial, at one time one of the biggest subprime lenders in the world. After the meltdown, he was sued by the SEC for insider trading and fined several million dollars. Reportedly, his company paid most of the fine.
Ms. Morgenson and Mr. Rosner have some lists of their own. Among these is a list of “feckless regulators.” This list includes Timothy Geithner, now U.S. Treasury Secretary; Greenspan; Frederic Mishkin, former Federal Reserve governor; and Andrew Cuomo, former Secretary of the Department of Housing and Urban Development (HUD), now governor of New York.
The authors said “friends of Fannie Mae” included former U.S. Treasury secretary Robert Rubin, known as the “master of deregulation;” former U.S. Treasury secretary Larry Summer; and Peter Orszag, senior economist on the Council of Economic Advisors.
Finally, the authors compiled a list of “doubters and those who pushed back,” in other words, the good guys.
Heading this list is Dean Baker, co-director of the Center for Economic and Policy Research, who co-authored with Ron Feldman, a 2002 paper warning that home prices were on an unsustainable trajectory that clearly indicated a housing bubble. When it burst, the paper warned, the impact would be disastrous.
Also on the good guy list is Marvin Phaup of the Congressional Budget Office (CBO), who scrutinized the finances of Fannie Mae and its sidekick, Freddie Mac, and concluded that the taxpayer subsidy they were getting was a poor use of government money. The authors said that Mr. Phaup’s report concluded: “the money these companies were reaping from their implied guarantees allowed them to distort the political process. Taxpayers were essentially, if unknowingly, handing the companies millions of dollars each year with which they [the companies] funded their protection game.” After the Phaup report was published, Mr. Phaup was asked to resign. However, his boss, June O’Neill (another good guy) vigorously defended his report before Congress. Mr. Phaup remained at the CBO, yet Congress ignored the report.
“Reckless Endangerment” does a lot more than name names of those involved in the crisis. It emphasizes just how corrupt our financial system and our political system are. There were a few good people who tried to stop this grand robbery of the country’s wealth, but there were thousands who participated in the crime and only a tiny fraction of them have been brought to justice.
*
(Reckless Endangerment, by Gretchen Morgenson and Joshua Rosner, published by Times Books-Henry Holt & Co., New York, NY, 331 pages; Retail price $30).