Another Corrective to the Conventional Crisis Narrative

I recently reviewed the outstanding Guaranteed to Fail, perhaps the best book written about the financial crisis. In the WSJ, James Freeman reviews Reckless Endangerment by Pulitzer Prize-winning journalist Gretchen Morgenson and analyst Joshua Rosner. It reinforces the argument I made in my review of Guaranteed to Fail that the conventional crisis narrative is a (largely successful) attempt on the part of officialdom to divert attention from their culpability for the crisis:

In Ms. Morgenson and Mr. Rosner’s book, a bipartisan parade of famous Washington movers-and-shakers appear in cameos to do some disservice (now largely forgotten) to taxpayers. There is Newt Gingrich lauding Fannie Mae at a corporate event. There is Larry Summers bullying his Treasury staff to water down a report critical of Fannie. There is current World Bank President Robert Zoellick as a Fannie executive in the 1990s lobbying on Capitol Hill.

Look at Rep. Barney Frank, responding in 2005 to the question of whether the government’s push to increase home-ownership rates might result in people buying more home than they could afford and putting themselves in dire straits. The authors report: “Frank brushed off the questioner. ‘We’ll deal with that problem if it happens,’ he barked.”

It happened all right, and perhaps the most amazing part of this tale is that so many of those responsible for the disaster remain in power.

A catastrophic failure of democratic accountability.

posted on 03 June 2011 by skirchner in Economics, Financial Markets

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