In September 2008, beset by mounting losses on high-risk mortgages and mortgage securities, the Federal Home Loan Mortgage Corporation teetered on the brink of insolvency. Fearing that confidence in the housing market would collapse completely if Freddie Mac and its competitor Fannie Mae failed, the US government made the difficult decision to place the two firms into conservatorship, taking control away from shareholders. Although the taxpayer commitment of hundreds of billions was meant to stabilize the housing finance system, Freddie's fall at the start of the financial crisis set off shockwaves around the world.
In Days of Slaughter, Susan Wharton Gates, a former 19-year Freddie Mac employee and vice president of public policy, provides a vivid eyewitness account of the competing economic and political forces that led to massive losses for shareholders, investors, homeowners" and taxpayers. With a keen eye to the policy landscape, Gates relates the fateful decisions that led to Freddie Mac's downfall and desperate rescue. She also examines today's worrisome headlines about potential future bailouts, the uneven housing recovery, and stymied congressional reform efforts. Throughout the book, Gates argues convincingly that policymakers will be unable to safely reform the massive housing finance system that currently rests squarely on taxpayer shoulders without addressing deeper issues of ideology, moral hazard, and interest group politics.
The first book to tell the story of Freddie Mac from an insider perspective" while casting a prophetic eye to the future" this first-hand account of housing policies, complex financial transactions, and the crazy quilt of federal and state actors involved in the Great Recession is a must-read. A cautionary tale of failed policies and corporate mismanagement that compellingly addresses previously unexplored issues of political ideology, organizational dynamics, and ethics, Days of Slaughter will appeal to readers everywhere who want a fuller explanation of what went awry in the US housing market.
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Susan Wharton Gates is passionate about the middle. A middle child herself, she grew up amid the deep national divisions over the Vietnam war, which also became the divisions of her family of origin. Not fun to be in the middle.
Things haven't gotten much better, if at all. The political and social fabric of nations, regions, communities and even families is too easily torn by the sharp edges of uncompromising ideology.
Gates has spent her career trying to blunt that edge and find the golden mean.
Five years at the Office of Management and Budget doing presidential budgets for a variety of accounts -- from drug interdiction to refugee assistance to veteran home loans -- taught her that a robust middle is critical to effective governance.
And 19 years at Freddie Mac, including four as Vice President of Public Policy, showed that ideology can claw apart a business strategy with devastating results. In 2008, the financial middle did not hold -- and we almost lost civilization itself. You can read about that debacle in her forthcoming book, Days of Slaughter: Inside the Fall of Freddie Mac and Why It Can Happen Again (Johns Hopkins University Press, March 2017).
In 2009, Gates founded Wharton Policy group to help firms and other folks find the middle through Robert Putnam's "purple problem solving" and other strategies.