The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America - and Spawned a Global Crisis [Hardcover]

The author has done an excellent job in demonstrating that the major subprime lenders,the great majority being concentrated in or near Orange County ,California,such as R Arnall's Ameriquest and A Mazilo's Countrywide,were engaged in a pattern ,repeated over and over again thousands of times,of deliberate misrepresentation,forgery and fraud.The goal was to misinform potential buyers seeking fixed rate loans so that they could be manipulated and maneuvered into signing variable rate adjustable loans with initial ,low ,teaser rates that would then increase dramatically after 2-5 years.The basic sales pitch was the old " bait and switch " gambit.

The author demonstrates that the major subprime lenders especially targeted older,elderly,single, black women with low incomes who owned their homes outright and /or had low fixed rate mortgages on their homes ,but who were either in poor health and/or seeking loans to upgrade /fix up their homes.The author provides numerous case studies demonstrating precisely how these black women were tricked and manipulated into agreeing to adjustable rate loans that dramatically increased their monthly payments over time.The same initial customer would then be victimized over and over again by affiliated subprime lenders who would claim that they could reduce the monthly mortgage payment .

The author shows how these firms were directly connected to the major Wall Street investment banks,especially Lehman Brothers.He then traces the securitization practices of the commercial banking industry and shows how the loans were spread and sold worldwide.

This book shows that the subprime real estate mortgage loan industry collapse was very similar to the collapse of the Savings and Loan industry in the 1988-1991 time period that resulted from highly speculative,Ponzi loan practices that started in the early 1980's .

I recommend this book for purchase.It is the first book to concentrate specifically on analyzing the subprime crisis as a criminal enterprise.

This was a strong book. Strong in the sense of well documented and researched, and strong in vivid detail and tone. The author says he has been covering predatory lending since the early 90's and I can believe it. He has many anecdotes, many stories of individuals being defrauded, and many interviews of persons who worked for predatory lenders. This is the first writing of any kind I can find to enable me to understand predatory lending, as opposed to just dumb subprime lending. This understanding arose when the author cited statistics that show 99.75% of these lenders' loans were not to purchase a house but to people who already owned a house. The book conveys in very strong detail the ways in which First Alliance and Ameriquest "preyed" on elderly, minority, sometimes incompetent homeowners and tricked them into putting their homes at risk for loans that were unnecessary, more expensive than called for and in many cases based on fraudulent documentation. There is no doubt that these are stories of outright criminal behavior and many more people should have been prosecuted for what they did (the owner of First Alliance and Ameriquest has died). Mr Hudson depicts thoroughly the business model of predatory lending, their hiring and training and sales practices, their advertising budgets and their lobbying prowess (he absolutely impales Deval Patrick, ACORN and many other organizations as being bought off by the predatory lenders). He provides real insight when he demonstrates that the owners of these businesses appear to take it for granted that they will only be in business for a few years. I was stunned that it appears to have been incredibly easy for someone who has previously run one of these companies and bankrupted it to set up another such business and go right back to defrauding homeowners. There should be some licensing or process that companies have to go through to get into that position. (I was reminded of another book I read recently called Dark Harbor about the mob dominating the NYC waterfront in the 1940s and 1950s, where the mob was able to obtain one union charter after another without any investigation of any kind).

The subtitle of the book refers to a gang on Wall Street but, although there was some content in the book that related to Wall Street, I would estimate it was no more than 20% and it was much less substantial and vivid than the dominant story about the predatory lenders. There was a page or two on rating agencies, about 20 pages on the relation between Lehman and First Alliance including a short summary of a trial that I found quite anticlimatic and a page that seems to have been taken right out of a recent book about Lehman called A Colossal Failure of Common Sense. I suspect there was some effort to position the book in buyers' minds as an anti-Wall Street book and while the author does have that perspective there just isn't that much content on that subject, compared to the detailed accounts of the predatory lenders fleecing their customers. Also, the majority of the book is set in the 90's (indeed, it begins in the 80's). Only the last 100 pages of the text are set in the 2000's. So I do not think such marketing is particularly accurate, which is ironic given the book's point of view.

A small point: when I bought this, Amazon's links were confusing the author, Michael W Hudson, with a Michael Hudson who is a different author.

The previous reviewers have done a good job of explaining basically what The Monster is all about. However, I would like to highlight why the book presents a unique challenge to academic economic theory, particularly as it applies to public policy.

The foundation stone of Neo-Classical economics is that market participants are inherently rational, are capable of "discovering" the best available deals, and will quickly put destructive market participants out of business. This is the Revealed Truth of Milton Freidman, the bonkers Objectivist philosophy of the beyond bonkers Ayn Rand, the rigid simple mindedness of the economics texts by Gregrory Mankiw and the Harvard kids who have been force fed this abstracted, idealized, establishmentarian slop....

Micheal Hudson never explicitly sets out to torpedo theoretic economics, he simply sets forth the way a set of perverse incentives, aided and abetted by an utterly dysfunctional regulatory apparatus, could make an absolute, unrecoverable hash of the Ivy League worldview... one in which all markets naturally seek the most efficient (and in Friedmanite orthodoxy) most moral allocation of assets and talent.

Hudson instead shows a nested structure of economic actors that behave more like criminalized, methamphetamine soaked, reckless, soulless swine. It is abundantly clear that "incentive structures" can, quite easily, produce outcomes that have a high degree of local rationality, i.e. individuals maximizing their gains, while at the same time have a higher degree of systemic irrationality.... i.e. stuffing grossly fraudulent paper into the securitization system in wholesale quantities with zero regard for the ultimate consequences. Such as imploding the credit markets...

Frankly, Hudson's book should be a mandatory text in every introductory economics class taught in this country, because it dispositively proves that the Neo-Classical/Washington Consensus model is a broken model.