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Subtitle: How Outsized Ambition, Greed, and Corruption Led to
EconomicArmageddon, Henry Holt &Co., NY., 2011, 31 pgs., index, notes, cast
of characters
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Reviewer comment The authors focus on the political demands that banks
and mortgage writers increase the amount of private home ownership. This
resulted in a massive increase in creation of mortgages and as the pool for
buyers with previously strong financial qualifications was depleated they
turned to finding potential buyers with less and less financial qualifications.
The mortgages were then assembled into financial securities that were sold to
investors. Meanwhile the politicians put pressure on the two government
(private) institutions, Fanny Mae and Fredie Mac, to guarantee these
mortgagtes. The CEO's of these quasi-government financial institutions, James
Johnson, Franklin Raines and David Maxwell, were eager to take advantage of the
opportunity to enrich themselves while expanding the power of their
corporations. The owners of private mortgage lenders such as Angelo Mozilo,
Walter Falk, David Silipigno ans Scott Hartman quickly jumped into action to
supply the subprime mortgages that the investment community demanded.
However, Jeffrey Friedman and Wladimir Kraus (Engineering) dispute this as the main cause of
the ultimate financial crisis, while agreeing that it did help generate the
'bubble' in housing prices and did create the dangerously unstable financial
situation. And Douglas Hubbard focuses on a more general and widespread cause
in a general failure of risk management.
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