Breaking the Bubble Cycle
The free market did not fail us. Our leaders failed us.


Who caused the financial meltdown? Peter Schweizer points his finger directly at the Left in his new book, Architects of Ruin: How Big Government Liberals Wrecked the Global Economy — and How They Will Do It Again If No One Stops Them. He sat down with NRO’s Kathryn Jean Lopez to lay out the case for the guilt of the Left.

KATHRYN JEAN LOPEZ: Isn’t it a bit much to blame the Left for the entire economic mess? 

PETER SCHWEIZER: No, not at all. Liberal social engineering caused the crisis. There were two major factors in the financial meltdown last year: the mortgage crisis and massive speculation on Wall Street. The Left sparked the mortgage crisis by pushing aggressively for banks to lower their lending standards. ACORN and others, for example, wanted welfare payments to be counted as income. As I point out in the book, this led to trillions of dollars in bad loans’ being made. The second factor, Wall Street speculation, was also fueled by the Left. People forget that the Clinton administration bailed Wall Street out repeatedly in the 1990s for highly speculative investments that went bad. No less than six times did they use taxpayer money to help Wall Street investment houses from facing huge losses. And in each instance they saw to it that Wall Street’s profits remained intact! Capitalism should be about profit and loss. If you bail people out from irresponsible behavior, guess what — you get more irresponsible behavior.  

LOPEZ: You’re guaranteed to be a Tea Party hit now though, aren’t you? 

SCHWEIZER: I love the tea-party crowd. They’re among the few in America willing to stand up and say, “Enough is enough.” And they instinctively understand the root of the problem — liberal social engineering. 

LOPEZ: There are architects of ruin on the Right, too, aren’t there? And folks who haven’t helped matters in and out of office? 

SCHWEIZER: Yes, there are conservatives and Republicans that went for the liberal message on housing and bank loans and warmed up to the big firms on Wall Street. As conservatives, we must remember what Milton Friedman said: There is a huge difference between being pro-business and pro–free market. Too many conservatives and/or Republicans have been coopted by business interests at the expense of being pro-free market. 

LOPEZ: There are some drawbacks to capitalism though, aren’t there? Cautions and needs for regulation? 

SCHWEIZER: The best way to deal with the excesses of capitalism is to let those who engage in them suffer from the consequences of their actions. Speculators who bet wrong should be wiped out, not bailed out by Washington. The Clinton administration really started all of this. Up until 1994, when they decided to rescue Goldman Sachs and other investment houses from bad bets on Mexican bonds, the federal government had never bailed out Wall Street. (The S&L bailout was different; the federal government is required to guarantee bank deposits.) Many of the complex financial instruments causing problems on Wall Street today were created in part to get around regulatory requirements or for tax purposes. More regulation will simply encourage more complexity.  

LOPEZ: What’s the deregulation myth? Why should we believe you? 

SCHWEIZER: Banks are the most highly regulated business in America today, with the possible exception of the nuclear-power industry. The conventional narrative, that free-wheeling capitalism caused this crisis, was written by people with an agenda, which is to grow the size and power of government. At the time of the Great Depression, the conventional wisdom was the same. Only later did scholars such as Milton Friedman and others show that the real problem was the money supply. All I ask is: Don’t just accept the conventional wisdom; actually look at the facts.