Shaky Ground: The Strange Saga of the U.S. Mortgage Giants

The 2008 financial crisis had many root causes, and the debate hasn’t ended about how much blame to apportion to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation—Fannie Mae and Freddie Mac, respectively, as they’re known on Wall Street and Main Street. Business reporter McLean (coauthor of The Smartest Guys in the Room) takes on the thankless task of explaining how these little-understood government-sponsored enterprises (GSEs) support American homeownership by buying mortgages so that banks can make more capital available for new borrowers. That function was a contributing factor in banks bingeing on subprime loans and thereby nearly triggering a world financial collapse. McLean ably describes a situation where, seven years past the brink of economic collapse, Fannie and Freddie are severely undercapitalized, faced with investor lawsuits, and caught up in political infighting that prevents either comprehensive reform or their ultimate abolition. It’s a complex story with no apparent solution, as even longstanding critics of the agencies have, in McLean’s words, concluded that sticking with “the devil you sort of know” is preferable to upending a still shaken domestic economy. McLean makes a convoluted tale, far removed from most people’s day-to-day economic lives, as clear as it can be made. (Sept.)