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Zoe-ACORN followup
Here's something in the Sol Stern City Journal article that may pertain to the culture that led to housing problems. I don't know if you are interested in this...
ACORN?s anti-capitalism leads it to deep distrust of capitalism?s central instruments?the banks and other financial institutions that ACORN would class high among those ?irresponsible . . . largest businesses.? ACORN loudly campaigns against ?predatory lending,? ?redlining,? and other forms of presumed abuse by financial institutions that supposedly hinder the minority poor from getting the capital needed for home buying and business start-ups. As an antidote, ACORN has latched on to a 1977 federal law, the Community Reinvestment Act (CRA), which was aimed at ensuring that banks do not discriminate against poor minority communities. Under its rules, banks must go through a costly process of reporting where and to whom they lend money, to show that they don?t discriminate. There are no official penalties for banks that get less than satisfactory ratings from the regulators on this issue. But when banks need approval for mergers or acquisitions, the CRA gives ?community groups? the opportunity to lodge complaints against them, alleging suspect lending practices. If there?s even the appearance of discrimination, the regulators may put the bank?s deal on hold.
JulieF: *Maybe this desire not to be seen as "discriminating" played at least a small role in the problem because people got loans that they obviously could never repay. People at banks and other entities may have felt blackmailed into extending loans or they'd be harassed. I don't know.
Re: Zoe-ACORN followup
Here's a little more.
The discrimination that the CRA sought to cure no longer exists, however. True, back when the now-defunct savings-and-loan industry provided most of the nation?s mortgages at rates capped by law, S&Ls often avoided lending in inner-city neighborhoods, where the risks of default were higher than usual, because they couldn?t charge increased interest to compensate them for the increased risk. But today, lenders can adjust the interest rates they charge borrowers according to the riskiness of the loan, so that they can make a profit by lending in the inner city. Today too, hundreds of individual mortgages are packaged together and sold to investors as ?mortgage-backed securities,? whose overall default rate is much easier to predict than the default probability of any individual mortgage. Thanks to these innovations, the capital available to inner-city borrowers is now plentiful. As Emory University finance professor George Benston sums up: ?Researchers using the best available data find very little discernible home-mortgage lending discrimination based on area, race, sex or ethnic origin.?
But if the CRA is now unnecessary, ACORN has found a use for it beyond wielding it as a propaganda tool to suggest that ?redlining? still exists. ACORN has developed a lucrative niche as an ?advisor? to banks seeking regulatory approvals. Thus we have J. P. Morgan & Company, the legatee of the man who once symbolized for many all that was supposedly evil about American capitalism, suddenly donating hundreds of thousands of dollars to ACORN. This act of generosity and civic-mindedness came, interestingly, just as Morgan was asking bank regulators for approval of a merger with Chase Manhattan. Not to be outdone, Chase also decided to grant more than $200,000 to ACORN.
The banks that ACORN has shaken down refuse to discuss their contributions to a political organization that, to put it mildly, is hostile to free enterprise. But one prominent consultant to the financial industry, who preferred to remain anonymous, admits: ?The banks know they are being held up, but they are not going to fight over this. They look at it as a cost of doing business.? Some of ACORN?s fellow community activists are even blunter. ?ACORN knows that corporate America has no starch in their shorts and, therefore, what they try to do is buy peace from groups that agitate against them,? says Robert L. Woodson, president of the National Center for Neighborhood Enterprise, a community-action group that stresses moral regeneration and individual responsibility rather than government handouts. ?The same corporations that pay ransom to Jesse Jackson and Al Sharpton pay ransom to ACORN.?
Such opportunism fits an ACORN pattern.
ACORN loudly campaigns against ?predatory lending,?
Noooooo! Not predatory lending!
I also found this negative article about ACORN. It involves Fannie and Freddie, so I will cut and paste a paragraph.
Long a priority of groups on the Left, the ?trust fund? ? also called the ?affordable housing fund? ? would get its revenues from a legislatively fixed share of the surpluses of the government?s Federal Housing Administration or the profits from the government-sponsored enterprises Fannie Mae and Freddie Mac. The latest version ? in the housing and GSE oversight bill that cleared the Senate Banking Committee in May ? would establish the fund by taking 1.2 basis points of interest from Fannie and Freddie?s loan portfolio ? about $500 million a year.
Enacting an off-budget funding entity for housing has long been a goal of Rep. Barney Frank, and since he became chairman of the powerful House Financial Services Comittee when the Democrats took Congress back a year and a half ago, he has inserted several versions of the ?trust fund? into many housing bills. ?Given our severely constrained fiscal realities,? Frank has argued, there needs to be ?a low income housing trust fund that will be paid for in ways that do not draw from federal tax revenues.?
Yet given how important low-income housing supposedly is to Frank and other advocates, there are relatively few safeguards to ensure that most of the Trust Fund proceeds are actually spent on affordable housing. There are prohibitions on using the funds for lobbying and political activity, but the bills ? including the Banking Committee package ? contain virtually no teeth in enforcing these bans. There are no explicit requirements for recipients of the grants to fill out timesheets for housing activity, or restrictions on groups using grant money to pay employees who also happen to do other things ? such as lobbying and political campaigning. And there are really no penalties other than being forced to give the money back and being disqualified for a new grant.
These safeguards are important, because some of the biggest ?housing advocates? also have politics in their portfolios. These groups would include the ACORN and the National Council of La Raza, both of which provide housing counseling as well as lobby for liberal causes and politicians.
JulieF: it goes on to discuss ACORN's history of election fraud and misuse of funds
http://www.openmarket.org/2008/06/16/an-untrustworthy-housing-fund-housing-bill-has-likely-acorn-slush-fund/
And ACORN has also been sanctioned specifically for misuse of federal housing funds. In 1994, the ACORN Housing Corporation (AHC) received a grant from the newly created Americorps to assist low-income families at finding housing. In applying for the grant, the AHC claimed its activities were completely separate from ACORN.
But one year later, the Americorps Inspector General would testify that ?AHC used Americorps grant funds to benefit ACORN either directly or indirectly.? She found several instances of cost-shifting from ACORN?s lobbying group to the housing entity, and also found several instances of steering recipients of housing counseling into ACORN memberships. (This report by the Employment Policies Institute contains the Inspector General?s testimony in full.)
/
But the only reason they were able to do that is b/c of Freddie/Fannie.
Congress, HUD, etc. People like Barney Frank and Chris Dodd who blocked GSE reform bills b/c their problems were "exaggerated." People like Andrew Cuomo (HUD) who repeatedly ignored calls to overhaul the GSEs b/c he wanted them to increase homeownership for low-income people. Also, people like Janet Reno who threatened banks about "redlining." Also, I wouldn't say Freddie/Fannie's regulations were ever "loosened" b/c I'm not sure they ever existed in the first place. ?
Here's an article on Andrew Cuomo's role (it's long) and a short one on Janet Reno. If you'd like the ones on Barney Frank et al let me know.
http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/1
http://www.arnoldporter.com/publications.cfm?action=view&id=437?
Here's an article from 1999 - from none other than the NYTimes. It sadly includes warnings of exactly what's happening now.?
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1
?Here's a c&p:
"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people...
And here's Franklin Raines wishing he could "help" more people get risky loans...?
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''?