"Shaky Grounds" by Bethany McLean
The book by Bethany McLean Shaky Ground: The Strange Saga of The US Mortgage Giants tells to the readers a story of the inflated power which government-sponsored enterprises (GSEs) obtained in the times prior to the global financial crises of 2008.
Freddie Mac and Fannie Mae, which belonged to the largest GSEs of the US of that time, were initially founded by the Congress. The initial aim of their establishment was to balance the US housing financing system through keeping it more affordable, as well as providing additional amounts of stability and liquidity. The mechanism through which this function was to be exercised lied in providing funds on affordable terms to the US banks, mortgage and saving companies which further redistributed them to households to provide loans for cheap housing. As a next step, these mortgages were packaged into multicomponent portfolios of mortgage-backed securities. Especially notorious practice was the provision of fixed rate 30 year mortgages. However, with the initial good purpose, this companies ended up spending substantial amounts of money as bonuses to their top managers, and also for lobbying the positive image of home ownership idea through the government officials. Specifically this means that executives of Freddie and Mac contributed a lot to financing of the political campaigns. One more mechanism used for this purpose were the “revolving door” hiring practices.
Therefore, one can state that the preferential treatment which the two companies had over years was the result of their influence strategy, basing on the favorable attitudes of presidents and the Congress towards policies providing more affordable housing.Reading narratives such as the Shaky Ground gives a valuable and detailed insight for the new generations of decision-makers and economic experts, as well as other individuals who are willing to be more aware of the triggers and the mechanics of the global mortgage crisis of 2008.
References
McLean, Bethany. Shaky Ground: The Strange Saga Of The U.S. Mortgage Giants. New York: Columbia Global Reports, 2015. …
