Wednesday, November 30, 2011

The Tehran Initiative by Joel Rosenberg

I've had The Tehran Initiative by Joel Rosenberg on my library "hold" list ever since I first heard it was coming out. I'd read the first book in this series, The Twelfth Imam when it first came out and as it ended in a cliff hanger, I eagerly looked forward to the next book!

I love Joel Rosenberg's books and I believe I've read them all. He's brilliant at taking Bible end-time prophecy and integrating it into a fictional account. Many have wondered how he can be so prescient and almost predict events before they occur. He repeatedly points to the Scriptures that inspire him. It is God, not him, that is providing the blueprint to future events!

This book jumps right in where the other left off, but makes it clear to the reader who may have forgotten details from the first book just who each character is. The book moves quickly and tightly integrates events as it switches back and forth between scenes. Having such a good grasp on actual current events, Joel Rosenberg is able to write very credible scenarios, making it easy to conceive that his stories could easily find their way to the front page of the NY Times.

I couldn't put it down and I look forward to the next installment. He left us with the Twelfth Imam in charge of Iran and Israel still facing an existential threat. David's true love is unaware of his real life and all that has changed in him since his boyhood. Is the Twelfth Imam the anti-Christ? Will America stand up for Israel or will Israel stand with God alone? When is Jesus returning for His Bride? Maybe the next book, The Damascus Countdown, will offer more answers! It's going on my hold list now!

Wednesday, November 9, 2011

Reckless Endangerment by Gretchen Morgenson & Joshua Rosner

Reckless Endangerment by Gretchen Morgenson and Joshua Rosner lays out the causes of the economic meltdown of 2008 in a clear and riveting manner.

Their story begins (and ends) with Jim Johnson, the head of Fannie Mae in the 90's. Faced with a hostile Congress, thinking of limiting the government's exposure to losses and considering privatization, Jim Johnson went to work rebranding Fannie Mae. He made the American Dream the cornerstone of his marketing campaign. He convinced lawmakers, lobbyists, do-gooders, and others with positions of influence that any threat to Fannie Mae was a direct threat to the American people and the dream of homeownership.

Of course this crock was concocted simply to protect the cash cow to which he had attached himself. Knowing he could make millions by growing Fannie Mae well beyond its initial mandate of purchasing mortgages to free up banks to lend again, Johnson was desperate for new sources of income. Fortunately he arrived at the helm during a perfect storm which would propel his ambitions and bank account into the stratosphere.

Favorable circumstances for Johnson began with a report that accused banks of discriminating against minority borrowers. Nevermind that the report was subsequently proved false, it provided the cover Johnson needed to demand changes in the lending requirements. Johnson had found his source of growth - new mortgages written to those previously unable to attain loans. It didn't matter at all to Johnson whether or not the people were indeed credit-worthy or could actually repay the loans. With Fannie Mae making it clear that they were desperate for these new loans, banks went into overdrive lending money to high-risk borrowers. They could use these loans to kill two birds with one stone - count them as "affordable-housing" outreach and minority loan outreach.

Everyone won, except the borrowers.

Although plenty of hints existed pointing to an eventual meltdown, sub-prime lending continued to escalate as investors looked to mortgage-backed securities as sources of risk-free income. Investors couldn't buy and  package the mortgages fast enough. Big investment houses gave the mortgage writers huge lines of credit to write new mortgages and then bought the loans. Traditionally, bad loans had to be bought back by the originators, but since the originators would be buying back the loans with the investment houses's own money, brokerage firms chose to look the other way when the loser loans began popping up.

When interest rates finally began to rise, the bottom began to fall out of the housing market. Homes, never truly within reach to begin with, moved even further away from the average borrower. Sub-prime lenders, desperate to continue to write loans, worked with agencies like Fannie Mae to reduce requirements even further. Zero down and negative amortization loans put people underwater in their house immediately. They were unable to refinance or sell their homes to get out from under the onerous, often fraud-riddled loans. The more unscrupulous of the lenders flat-out lied on the forms, often changing the information given to them by the borrower or they lied to the lender stating the borrower only qualified for the higher-fee, zero-down loans. In one particular mortgage security, 5% of the borrowers never made a single payment. Within months, 40% were in default.

Of course these loans could not have been securitized with out the help of the ratings agencies. Willfully blind to the new lending standards, these agencies rated the securities AAA. Even after the loans began to fail, the agencies, turned a blind eye, asking only for the barest of information on the borrowers. Since they were paid according to the value of the security, the watchdogs had every incentive to value them highly. Plus, if they downgraded the mortgage-backed securities, banks all over the country would begin to fail as most kept their required cash reserves tied up in the fraudulent investments. Eventually, the agencies realized that to downgrade the securities threaded to lock up the whole economy.

Desperate to keep the good times rolling and knowing the rating agencies would be complicit, investment houses began to develop new products to hide the rapidly failing loans. Investors were becoming wise to fact that the mortgage securities were filled with "liar loans" destined to fail. So brokerages sliced up the pools into risk categories. Unable to sell the riskiest slices, but required to sell those first, they put those bottom slices into another product called "collateralized debt obligations." These hid the bad mortgages from any prying eyes. Of course the investment brokers themselves were dumping all their own investments in mortgage backed securities while continuing to sell them to unsuspecting investors.

Jim Johnson got out before the whole thing crashed. He saw the writing on the wall when Fannie had to turn to criminal accounting to generate the numbers needed to guarantee his bonus.

Slowly the regulators and congress began to wake up to the coming Armageddon. By then it was too late. The house of cards built by Jim Johnson came crashing down and buried million of homeowners and investors. Trillions of dollars have evaporated thanks to his corrupt scheme.

Unfortunately, anyone with a pulse could see that giving half a million dollar mortgages to someone without a job was unsustainable. But with a very rare exception, the people who were supposed to be noticing were either blinded by immoral and corrupt greed or their own sense of do-gooderism. Of course it had to fail, but the corrupt Johnson knew just how to work the do-gooders (We're pushing the American Dream) and the corrupt (together we'll make millions if you just look the other way).

There is no happy ending.

Johnson still enjoys positions of power. No one has been indicted or gone to jail for their illegal acts. The Dodd-Frank regulation that was supposed to make sure this never happened again was written by the most duped and corrupted congressmen responsible for the original fiasco. Millions of Americans remain in homes underwater and in foreclosure. Johnson created a bubble, earned $100,000,000 in the process, and got away with it.

Tuesday, November 8, 2011

Speaking of George Gilder by Frank Gregorsky

The book Speaking of George Gilder by Frank Gregorsky  contains quote after quote from George Gilder. I first heard of George Guilder when Dennis Prager praised him repeatedly for his wisdom and insight. I read this was a good book to get a sampling of that.

It is, but without the context, many of the statements went straight over my head. He is truly brilliant, visionary, and smart, but I think I'll have to try to get one of his books instead of this one.

I didn't finish it...