Investors beware: Only the steeliest will not gnash their teeth in utter frustration after reading Reckless Endangerment, a stinging retelling of the 2008 financial collapse written by Pulitzer Prize winner Gretchen Morgenson, with Joshua Rosner.

Morgenson, a  business reporter, columnist and assistant business and financial editor at The New York Times, says the collapse originated with the corrupt and greedy who created and exploited the subprime housing market. No faction is innocent: Republicans and Democrats, bureaucrats and bankers, public servants and academics -- all stripes and types share culpability in the crash.

She provides character studies of the spectacularly well-paid executives who ran mortgage lenders Fannie Mae, Freddie Mac (together, they accounted for $3.4 trillion in mortgage lending in 2003), Countrywide Financial, NovaStar and others.

Ratings agencies that investors rely on for unbiased information, including  Standard & Poors (now under Federal investigation) have much to answer for, too.S&P and other agencies realized record profits by awarding their highest ratings to bundles of troubled mortgage loans, making the mortgages look less risky and be more valuable to investors.

Until the collapse, that is.

"Even the credit-rating agencies, supposedly neutral assayers of risk in mortgage securities, beat back attempts to rein in predatory lending,'' Morgenson writes.

Morgenson weaves in the stories of the skeptics and doubters who fought the destructive subprime lending mania, often to no avail. Even a governor (of Georgia) couldn't save the teeth written into a tough law that provided consumer protection against predatory lending. The lobbyists for the lenders and their hungry offshoots spent multiple millions to defang the law and keep the money rolling in.

Among the chief perpetrators in  Morgenson's account are James A. Johnson, CEO of Fannie Mae, 1991-1998, and a director of Goldman Sachs; Barney Frank, Democratic congressman from Massachusetts; Larry Summers and Robert Rubin, deputy secretary and secretary of the U.S. Treasury, respectively, 1995-1999 (Summers held the top spot from  1999 to 2001); Angelo Mozilo, co-founder and former chief executive of Countrywide Financial; Scott Hartman and W. Lance Anderson, chief executives of NovaStar; Timothy F. Geithner, president of the Federal Reserve  Bank of New York, 2003-2008 (and now U.S. Treasury secretary); Alan Greenspan, chairman of the Federal Reserve Board, 1987-2006, and Andrew Cuomo, HUD secretary, 1997-2001.

With Johnson, "the politicization of credit began'' in 1992. He led Fannie Mae, a partially private mortgage lender that also enjoyed government perqs and benefits (lower borrowing costs, $2.5 billion credit line at the U.S. Treasury, exemption from paying state and local taxes, and freedom from filing financial statements with the SEC.)

"Under Johnson, Fannie's primary goal changed to protecting -- at all costs -- the company's government ties and the riches that sprang from them.''

In order to generate loans, Fannie said that "lack of credit history should not be seen as a negative factor.'' Credit scores were ignored, joblessness was overlooked. No money down and no savings were required. These borrowers were considered ideal because they paid a higher interest rate and early mortgage repayment was  minimized (and if it happened, penalized). The goal? Keep those income streams coming, at all cost.

"In other words, a banker confronted with these new relaxed requirements, could off-load any risky loans to the government-sponsored enterprises responsible for financing home mortgages for millions of Americans.'' They could sell the loans to Fannie or Freddie Mac and the "downside could be handed off to the government.''

In 1994, Morgenson writes, $40 billion in subprime loans were made in the United States; in 1999, $160 billion.

By 2006, subprime titan Countrywide Financial financed about 20 percent of all mortgages in the U.S. (at a value of about 3.5% of the U.S. GDP). At the collapse, it was purchased in 2008 by Bank of America  for $4.1 billion.''

Morgenson says whistleblowers who tried to prevent the collapse went ignored: They suggested, in 1996, that to privatize Fannie Mae and Freddie Mac would reduce the risk of a costly taxpayer bailout. In 2008,that bailout happened.
"It is not yet known how much these debacles will cost the American taxpayer, but conservative estimates put the total in the hundreds of billions of dollars,'' she writes.

"Will a debacle like the credit crisis of 2008 ever happen again?'' Morgenson asks.

Yes, because Congress did not fix the problem of too-big-to-fail when it had the chance, and for another unsettling reason.

"It is indeed one of the most frustrating aspects of this story -- the rise of subprime, the dereliction of duty by so many who participated in the mortgage mess,'' that "the cast of characters that created the mess continues to hold high positions or are holding jobs of even greater power.''

What's an investor to do? Maybe what so many of the subprime lenders did. Buy Treasuries.

Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon, by Gretchen Morgenson and Joshua Rosner. Times Books. Henry Holt and Company. $16.95.