Tuesday, November 26, 2013

INFILTRATED: A BOOK ABOUT THE FINANCIAL CRISIS

Infiltrated: How to Stop the Insiders and Activists who are Exploiting the Financial Crisis to Control our Lives and Our Fortunes. Jay W. Richards. McGraw Hill Education, 2013. 299 pp. $25.00. ISBN 978-0-07-181695-3.

            In 2008 the United States of America entered into a period of financial disaster which is still wreaking havoc even today. Since the initial market crash the media has been pointing their fingers in every direction trying to find someone to blame. I moved to North Carolina in 2011 to study for my Master’s degree, and distinctly remember hearing all kinds of horror stories about people losing their jobs, and local governments being unable to fund high schools. Some of the people that I met and befriended when I was there lost their jobs due to the crisis, and were force to leave their homes. What happened? In Infiltrated Jay W. Richards, who holds a PhD from Princeton, is a Fellow at the Institute for Faith, Work & Economics, and a fellow at the Discovery Institute, seeks to explain what really caused the Financial Crisis, and why there may very well be another such crisis in the future. I will first note the purpose of this book, how it is structured, and its relative worth.

            The purpose of this book is to explain the economic structures and principles that need to be understood in order to understand why the financial crisis took place, and why, if things don’t change, another crisis is on its way. The author also points out who are the main actors behind the financial crisis, and why their actions led to the market crash. The author takes the time to explain how different financial structures work, their advantages and weaknesses. These explanations allow the uninformed reader to understand what happened, and what needs to be done. In a sense, his book is a call to action, as the author notes that the US government has embedded, in law, the very structures that caused the financial crisis.

            In the prologue the author gives a summary of what brought him to write this book, which was preceded by a book written in defense of Capitalism and free market. The author explains his intellectual journey from being a supporter of socialist economic theory to becoming a supporter of capitalism and free market theory. The first chapter describes the attacks on small cash lenders, and the forming of a bureau (the CFPB) with the purpose of regulating big companies that put the consumer in financial peril. Richards points out that these actions ended up causing more financial difficulty for American. The first chapter serves as an introduction to a number of themes that will be considered in more detail later in the book. Chapter 2 is a survey of the history of how currency came into existence, and on the development of loans. He notes how different types of loans work, and how they came to be accepted by society, what they permit, and their importance for the consumer.

Chapters 3 and 4 introduce the reader to three of the main actors in the financial crisis. Chapter 3 introduces us to two of the main characters in the market crash. Richards provides an analysis of the actions of the Herb and Marion Sandler, both in their loan company, and in politics, and concludes that they were, indeed, some of the main actors in the financial crisis. Chapter 4 introduces another actor that is directly responsible for the market crash, Martin Eakes. Richards gives us a brief overview of his story, his company and his techniques.

In Chapters 5 & 6 Richards considers two groups that were main actors in the market crash. The first an activist group, and the second a government agency. In chapter 5 Richards returns to the Sandlers and notes how their monetary  involvement with ACORN, an activist group designed to obtain special rights for the underprivileged in the US (through devious means), allowed them to defeat their competition in the loans marketplace without getting their hands dirty. In chapter 6 Richards points out the poor practices of the Center for Responsible Lending. He notes that they only targeted the competition of their wealthy donors, they used fallacious arguments and scare tactics to bend their prey to their will, and hypocritically attacked others for doing the same things that they were guilty of doing. He also notes the important influence of the Sandlers in this government agency that was the intellectual baby of Martin Eakes.

In chapter 7 Richards explains how selective Government bailouts contributed to the market meltdown. He also provides the reader with more important details about how loans and investments work. In chapter 8 Richards analyses the official story that was given to explain the market crash. He also shows why the official story was, for the most part, in error and pointed the finger at the wrong principles, companies, and people. In chapter 9 Richards provides the counter-arguments that Wallison brought against the official story. He explains how the government and media responded to Wallison, and shows how Wallison’s claims were vindicated.

Chapter 10 is an overview of the new Dodd’s and Franks Law and the problems created by this law, as well as the creation and immediate effect of the government bureau known as the CFPB (Consumer Financial Protection Bureau). In chapter 11 Richards considers the attacks on small loans offices, and explains how they work, how they are wrongly portrayed by the activists, and what will happen if they are closed. In chapter 12 Richards gives a summary argument for the claim that Free Enterprise is the best economics theory, that too much government interference in the economy will only make things worse, and that the natural incentive of making money actually does regulate companies. In the final chapter, the conclusion, Richards explains what needs to be done to avoid a future financial crisis, and calls on the participation of every conscientious American citizen.


            This book provides the uninformed reader with all the information needed to understand what happened in the 2008 meltdown and the years that followed. Furthermore, the reader is given a better understanding of the advantages of a number of different financial devices that are frequently portrayed by activists in a bad light. This book is a must read by anybody who is interested in Economics, who is interested in the future economic success of their country (understanding what Richards says in this book will be useful for any country, not just the United States), or who is curious to understand what happened in the US financial crisis. It is an easy and interesting book to read, even for someone who has no understanding of economic terms. The author has successfully combined history, economics theory, and a call to action into an intriguing book that reads like a mystery novel. By the end of the book the reader will be convinced that the last 5 years of economic history in the US serve as the best argument for capitalism and free market economics.