- The Washington Times - Monday, February 1, 2010



By Peter Schweizer

Harper, $24.99,

217 pages

Reviewed by John R. Coyne Jr.

With the senatorial election in Massachusetts effectively torpedoing President Obama’s jerry-built monstrosity of a health care plan - a plan that the administration and its allies in Congress wasted a whole legislative year constructing - and with few accomplishments that are not the results of George W. Bush administration initiatives, the president has pivoted and is once again throwing pseudopopulist punches at the best available targets - banks, businessmen and, by implication, the free market.

Easy for him to do. What caused the collapse of the subprime mortgage market, which led to the greatest financial meltdown since the Great Depression? The convenient explanation, advanced by the political left and reflexively parroted by much of the mainstream media, is that there was massive deregulation during the Bush years and that the government during that period failed to police capitalism. However, as Peter Schweizer points out, this is simply not true. The banking sector is the most regulated industry in the United States. And far from massive deregulation during the Bush years, that administration actually added about 1,000 new regulations to the Federal Register annually.

What really happened? As Mr. Schweizer shows us in this strongly written, highly readable and thoroughly documented study, the meltdown was primarily the result of a liberal left agenda pushing the notion of housing as a fundamental human right. The idea was promulgated by Democratic politicians, including Rep. Barney Frank of Massachusetts and Sen. Christopher J. Dodd of Connecticut, the Clintons, Clintonista baby-boomer bankers such as Robert E. Rubin and bureaucrats such as Andrew Cuomo, and their partners in race-baiting, extortionist organizations such as Operation PUSH and ACORN.

Along the way, the fair-housing movement became an industry in itself, pushing banks to make more than $4 trillion in bad loans to people with bad credit and in the process making credit a civil right; turning Fannie Mae and Freddie Mac into a private piggy bank for the Congressional Black Caucus and the Congressional Hispanic Caucus; and adding Rahm Emanuel to the board of Freddie Mac at $46,000 an hour. When Mr. Emanuel ran for Congress in 2002, he received significant contributions from Freddie Mac’s senior management, Freddie and Fannie raised money and held fundraisers for several members of the House Financial Services Committee, among them Mr. Frank.

Throughout this saga, two of the most frequently recurring names are those of Mr. Frank and Mr. Dodd, who, Mr. Schweizer says, was “the number one recipient of campaign funds from Fannie Mae.” Mr. Frank generally gets a pass, partly because he’s intelligent and fast on his feet and partly because political correctness demands that he be treated very carefully. But Mr. Dodd, who like Mr. Frank personally profited from his alliance with subprime lenders, just couldn’t outrun the charges of corruption, and had he not withdrawn, he would have been thrown out in November.

And so, as the president pivots, what has been learned?

“The real lesson of the Fannie-Freddie scandal is about what happens when government tries to rig the marketplace in favor of a certain socially approved outcome. It is worth paying attention to Fannie and Freddie because their story is about to be replicated by President Obama and his team - which is largely composed of Clinton retreads - in numerous policy areas, including energy, health care [we can perhaps cross that one off for now], education, and even once again in housing.”

“Government intervention, bailout capitalism and liberal social engineering got us into this economic mess,” Mr. Schweizer writes. “The prescription now being offered to get us out of it? More of the same.”

And more of the same, in green: “The capstone of liberal state capitalism in the age of Obama is the administration’s efforts to pump up the so-called green economy. … Forcing the creation of subsidized markets to promote expensive technologies for which there is no real demand distorts the economic system and creates investment bubbles.”

Are we headed for a green-tech bubble? As a sure sign, Mr. Schweizer points to “the announcement by Heidi Fleiss, the notorious Hollywood Madam, that she was canceling plans to open a male brothel in Nevada and was instead going into green technology. ‘That’s where the money is,’ she told a newspaper. ‘It’s the wave of the future.’ ”

Indeed. And many of our leaders in Washington have a great deal in common with Ms. Fleiss.

John R. Coyne Jr., a former White House speechwriter, is co-author with Linda Bridges of “Strictly Right: William F. Buckley Jr. and the American Conservative Movement” (Wiley, 2007).

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