Similar to a Shakespearean tragedy, James R. (Bob) Hagerty's recently published book "The Fateful History of Fannie Mae: New Deal Birth to Mortgage Crisis Fall" outlines a classic rise and fall — in particular, that of government-sponsored enterprise Fannie Mae, explained AEI's Alex Pollock at an event on Wednesday. Hagerty outlined how Fannie grew far beyond its humble beginnings; initially a small detail of Roosevelt's New Deal, it eventually became a subsidy to the housing market supported by a powerful group of realtors and home builders. Reforming Fannie Mae was not a major priority, said Hagerty, yet few realized the contradiction of intertwining public policy with the expectations of private shareholders.
Hagerty emphasized that after surviving several abolishment attempts and arising victorious after the Savings and Loan crisis, Fannie Mae began its ultimate ascent, hiring politicians to perfect its lobbying efforts and maintain its benefits. He then explained how Fannie's weak regulation, promises of increased homeownership, and poor accounting practices drew attention away from the swelling asset bubble of the housing market, although Wall Street was paying attention and profiting. Underestimating the risks, Fannie invested at exactly the wrong time, crumbling at the feet of American taxpayers. Hagerty concluded with a lingering question: will Congress now trust housing finance to the free market?
The protagonist starts humbly, progresses in the world, survives various scrapes and threats, finally grows exceedingly rich, admired, feared, powerful and exceptionally arrogant. Then come the dizzying collapse and utter humiliation. Thus there is a classic rise, hubris, nemesis and fall. It could be a Shakespearean tragedy, but it is “The Fateful History of Fannie Mae: New Deal Birth to Mortgage Crisis Fall,” a new book by James R. (Bob) Hagerty, who covered the drama of Fannie and related events from 2004–2010 for The Wall Street Journal.
Hagerty will present his story of big-time government-sponsored finance, high and low politics, little-known history, colorful personalities, risk come home to roost and unintended consequences through the skillful lens of a veteran journalist. A panel of experts will then discuss Hagerty’s book.