Architects of Ruin: How big government liberals wrecked the global economy---and how they will do it again if no one stops them (Hardcover)

~ Peter Schweizer (Author)

Editorial Reviews

Review

Praise for DO AS I SAY, NOT AS I DO:“A spirited attack on lefty icons.” (New York Times )

“An entertaining exposure . . . In a series of 11 profiles on leftist icons from Noam Chomsky and Al Franken to Hillary Clinton and Ted Kennedy, Schweizer reveals that the most vocal liberals do not practice what they preach.” (Weekly Standard )

Product Description

Was the financial collapse caused by free-market capitalism and deregulation run amok, as liberals claim?

Not on your life, says Peter Schweizer. What we are really witnessing is a massive failure of social engineering by liberals.

Architects of Ruin, bestselling author Peter Schweizer describes in riveting detail how a coalition of left-wing activists, liberal politicians, and "do-good capitalists" on Wall Street leveraged government power to achieve their goal of broadening homeownership among minorities and the poor. The results were not only devastating to the economy, but hurt the very people they were supposedly trying to help.

The story begins in the 1960s with Saul Alinsky, the legendary Chicago rabble-rouser who trained his acolytes in highly aggressive techniques of community activism. Alinsky's disciples—along with race-baiting activists like Jesse Jackson—seized on the "redlining" controversy of those years to argue that banks were guilty of racial discrimination. In the 1970s, with the help of liberal senators like Ted Kennedy and William Proxmire, legislation was passed that put bankers under the thumb of local activists.

In the Clinton years, a new generation of liberal technocrats came to power in Washington and on Wall Street. Schweizer describes how a powerful phalanx of elite liberals, including Bill Clinton, Robert Rubin, Andrew Cuomo, Barney Frank, Chris Dodd, Janet Reno, Deval Patrick, Henry Cisneros, Barack Obama, Nancy Pelosi, Ted Kennedy, Charles Schumer, and many others, aggressively pushed banks to make trillions of dollars in loans to individuals who should never have received them.

Meanwhile, Clinton forged a new form of state capitalism in which the big Wall Street financial companies were repeatedly bailed out—with their profits intact—from a series of costly errors, leading them to take ever larger risks. Both financial policies had profoundly distorting effects. The result was the bursting of twin bubbles in mortgages and mortgage-backed derivatives, in turn leading to a global economic collapse.

This tale of liberal "Robin Hood capitalism run wild" has never been told. But more than just a story about the past, it is also an urgent warning about the future. For today, the very same people who planted the seeds of the collapse are back in Washington, tasked with cleaning up the mess and determined to use the crisis they caused as cover for a massive overhaul of the American economic system.

These people have learned nothing from their past mistakes and are busy applying the same methods to other sectors of the economy—health care, the auto industry, real estate (again!), and above all the promotion of "green" technologies—inflating bubbles that are sure to bring about another crisis. Ordinary Americans who foot the bill for the last state-capitalist bubble have reason to be afraid—very afraid—of the inevitable result.

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Product Details

• Hardcover: 240 pages
• Publisher: Harper (October 6, 2009)
• Language: English
• ISBN-10: 0061953342
• ISBN-13: 978-0061953347
• Product Dimensions: 9 x 6 x 1.1 inches
• Shipping Weight: 13.6 ounces (View shipping rates and policies)
• Average Customer Review: 3.8 out of 5 stars  See all reviews (18 customer reviews)
• Amazon.com Sales Rank: #24,833 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

43 of 48 people found the following review helpful:

5.0 out of 5 stars Extremely Well-Constructed Narrative, December 3, 2009

By	Creeb - See all my reviews

Schweizer has done what few other analysts of the late 2008 financial meltdown have been able, or even willing to do, and that's write a comprehensive and comprehensible narrative of the origins of the crisis. Many analysts of a free market bent will throw off broadsides at Fannie Mae, Freddie Mac, and the Community Reinvestment Act and leave it at that, assuming that, having taken shots at these obvious governmental meddlers, the total picture simply paints itself. Well, it doesn't, and that's where Schweizer excels. Schweizer starts at the beginning and, chapter by chapter, walks you forward into the teeth of the meltdown. A true tour de force.

Three points of interest:

1) Schweizer opened my eyes to the neat trick pulled by President Clinton - while declaring the Era of Big Government to be Over, he was concurrently manipulating financial institutions to pick up the wealth redistribution slack, almost wholly under the public radar. Brilliant. Devious. Destructive.

2) I believe Schweizer goes too easy on the Bush administration. While they made efforts to address the worst of the Clinton abuses, they did encourage the same sort of "universal home ownership" mentality as the Clinton cabal. Chalk up their efforts to promote ownership as misguided and their efforts to reign in the worst of the abuses as lacking in sufficient urgency (rather than neglect) - they still failed to head off the financial collapse.

3) Schweizer altered my perspective on the wage controls that were imposed on the executives of the financial institutions that received bailouts. Those wailing about the assault on the free market are, for the time being, off-base. Free market my rear end - a firm like Goldman Sachs has been gambling for decades with the implicit backing of the Treasury; much of their past compensation has derived from that government backstop. Remove the backstop, and I don't care how much they make. Otherwise, as long as they're playing with the House's money, I don't see why they shouldn't be paid government scale wages. (Heh - a monkey could do what the execs of GS are doing now, borrowing at 0% and lending it back to the Fed at 3%. Hardly work worthy of millions in bonuses.)

28 of 31 people found the following review helpful:

5.0 out of 5 stars Read the book, not the reviews., January 13, 2010

By	B. Ray (Roseville, CA) - See all my reviews

Unlike a few of the critical readers, I actually read the book before giving this review. This is a very thorough book that carefully documents the major developments that led up to the financial melt-down of late 2007 including the CRA, the governmental pressure to make home loans to lower-income citizens who could only marginally afford them, the resultant buy-back by the federal government of most of those loans so that banks were relieved of risk in making them, the not-surprising greed of the mortgage industry in promoting these loans, the virtual take-over of Fannie Mae and Freddie Mac by community activists, the establishment of an implied federal backing of this risk, and the resultant bubble that has burdened the tax-payers with more debt in less time than ever in our history.

Note that the positive reviews state points made in the book, all of which are carefully footnoted so can be fact-checked. The negative reviews typically say that the book is weak because it is in conflict with some well-known perceived fact. Those "facts" turn out to be the media consensus that is usually not based upon certifiable facts but on some anonymous statement or an editorial opinion.

Both supporters and critics point out that the tone can be overly strident. Whether or not this might have been more persuasive to unbiased readers is questionable but it would make for a better read.

Those readers who have already made up their minds that the melt-down was the responsibility of an unfettered capitalistic system will quickly dismiss the facts presented. Those readers who had generally concluded that the main contributor was the CRA combined with activist's pressure and capitalist's greed will now have facts and dates to flesh out their suspicions. Objective readers will probably be surprised to discover how long it took for all of these factors to build before the bubble burst.

I'm buying four more copies to send to others who need to read this important book. I encourage you to read it and make your own judgment as to how deep our financial and political problems are.

27 of 31 people found the following review helpful:

5.0 out of 5 stars Architects of Ruin by Peter Schweizer, December 26, 2009

By	Walter H. Pierce (Cypress, Tx USA) - See all my reviews (REAL NAME)

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Architects of Ruin
by Peter Schweizer

By 2007 up to 4.2 Trillion dollars of sub prime loans had been made. "By 2005, almost 33 percent of the new mortgages were interest-only and 32 percent of new home buyers put no money down "(Schweizer, 2009 ).

Peter Schweizer's book: Architects of Ruin explains how these dire credit conditions and the resultant economic calamity happened.

Schweizer asks and answers this question: "Why has this story been missed? It isn't all that hard to understand. First of course, the operations of quasi-governmental agencies such as Fannie Mae and Fredddie Mac are shrouded in layers of bureaucratic tedium. Few reporters take the time to actually dig into their inner workings. Besides, they are governed by congressional committees, so people naturally assume that some responsible is paying attention."

Carter
Schweizer details how activist organizations developed tactics to challenge redlining. This was begun by Jesse Jackson's PUSH and Gale Cincotta of NPA and Acorn.

"In 1976 Cincotta began pushing for something she called the Community Reinvestment Act (CRA). Again , the idea sounded simple enough: declair that banks have "an afffirmative obligation: to lend to people in their own neighborhoods, and make their record of doing so part of the approval process for mergers, acquisitions, or expansion. In short , make it the law that banks needed to lend in areas they had traditionally avoided out of fear that they were poor credit risks." Page 16.

Reagan and Bush I
"For more than fifteen years, fair housing activists had been using the Community Reinvestment Act to compel banks to make increasingly risky loans. Using tactics of intimidation, delay, and public embarrassment, they had achieved stunning results. By 1990 some $5 billion had been shaken from banks through these tactics."

Clinton
"By early 1995, the Clinton administration was pushing a revision to the CRA. It wanted a numerical quota system to be used to evaluate whether banks were loaning enough to low-income and minority groups." Page 66

"By the middle of the Clinton administration, Fannie and Freddie were no longer simple lubricants of the American financial system. Instead, they became ground zero of a vast social engineering project that was willing to take exorbitant risks with taxpayer dollars. Once securely in the hands of idealistic baby boomers who constantly confused their corporate mission with their activist vocation, these institutions soon abandoned their traditional conservative approach to mortgage finance and became avenues for relaxed lending standards, helping in turn to inflate the subprime credit bubble." Page 80

"Meanwhile , the Clinton adminstration had created a culture of government-funded risk in the financial markets and in collusion with Wall Street had midwifed a new form of state capitalism. The constant bailouts of failing Wall Street firms meant that the large banks and investment houses were shielded from the consequences of unruly speculation." Page 153

By the end of the Clinton administration, Treasury Secretary Robert Rubin could proudly announced that "the number of home mortagage loans extended to African-Americans has increased by amost 60 percent, to Hispanics by a little over 60 percent, to low and moderate income borrowers by a touch under 40 percent, figures that are well above overall market increases." page 72

Bush II
"Owen Ullmann, a former BusinessWeek writer who covered economic policy for USA Today, wrote of Fannie Mae, 'It will hire key government critics to buy their silence, and it will intimidate lawyers, consultants and financiers who go up against it by pressuring clients of opponents to withdraw their business.' he goes on to quote a congressional source: 'Fannie has this grandmotherly image. But they'll castrate you, decapitate you, tie you up and throw you in the Potomac. They're absolutely ruthless.' Not what you expect to hear about a government-sponsored agency." (Page 108)

"To cope with the rising tide of concern in the Bush administration and on Capitol Hill, Fannie and Freddie embarked on a an ambitious political plan." (Page 111)
"Fannie and Freddie sponsored more than eighty fund-raisers for congressional candidates, even though federal law bans corporations from engaging in direct political activity. This blatant violation of the law would lead to a record fine of $3.8 million from the Federal Election Commission." (Page 111)

"Both Snow and Greenspan were blunt: 'The mortagage portfolios of Fannie Mae and Freddie Mac present a risk to the nation's financial system and federal geovernment.'
"In early 2003, the Senate Banking Committee approved bill to tighten the regulation of these lenders, thanks to the support of every Republican on the committee. All committee Democrates voted against it. The bill was killed on the Senate floor." (Page 113)

"As she wrote, "Since 1996, sub-prime lending has grown 489% -- from $90 billion to $530 billion -- largely through the extension of credit to first-time borrowers." (From Meredith Whitney page 160)

"Mortgage-backed securities are very complex investment tools. Basically, they involve pooling large batches of mortgages, splitting them up into small pieces, and selling the resulting products to investors as securities." (Page 161)



Conclusions
"Vernon Smith, a Nobel laureate in economics, says the federal government 'set the stage for housing bubbles by creating those implicitly taxpayer-backed agencies, Fannie Mae and Freddie Mac, a lenders of last resort.' In other words, far from being the results of runaaway capitalism, the housing bubble and the financial crisis that followed are the results of runaway government." (Page 119)

"The great irony is that those who unleashed this economic calamity appear to be the main beneficiaries of the crisis they helped to create. What's more, they are back in power today and are basicaly planning the next one." (page 166)