The Roots of Today's Mortgage Mess
SPREADING THE VIRUS
HOW ACORN & ITS DEM ALLIES BUILT THE MORTGAGE DISASTER
Still pushing to protect junk mortgages at any cost: ACORN continues to march and rally to get Congress to support its radical agenda, as with this demonstration in Washington, DC, in March.
October 13, 2008
TO discover the roots of to day's economic crisis, consider a tale from 1995.
That March, House Speaker Newt Gingrich was scheduled to address a meeting of county commissioners at the Washington Hilton. But, first, some 500 protesters from the Association of Community Organizations for Reform Now (ACORN) poured into the ballroom from both the kitchen and the main entrance.
Hotel staffers who tried to block them were quickly overwhelmed by demonstrators chanting, "Nuke Newt!" and "We want Newt!" Jamming the aisles, carrying bullhorns and taunting the assembled county commissioners, demonstrators swiftly took over the head table and commandeered the microphone, sending two members of Congress scurrying.
The demonstrators' target, Gingrich, hadn't yet arrived - and his speech was cancelled. When the cancellation was announced, ACORN's foot soldiers cheered.
Editorial writers from Little Rock to Buffalo condemned ACORN's action as an affront to both civility and freedom of speech. Editorialists also pointed out that the "spending cuts" the protesters railed against were imaginary - Gingrich proposed merely to slow the growth in some welfare programs and turn control back to the states.
Yet ACORN had only just begun. Two days later, 50 to 100 of the same protesters hit their main target - a House Banking subcommittee considering changes to the Community Reinvestment Act, a law that allows groups like ACORN to force banks into making high-risk loans to low-credit customers.
The CRA's ostensible purpose is to prevent banks from discriminating against minorities. But Rep. Marge Roukema (R-NJ), who chaired the subcommittee, was worried that charges of discrimination had become an excuse for lowering credit standards. She warned that new, Democrat-proposed CRA regulations could amount to an illegal quota system.
FOR years, ACORN had combined manipulation of the CRA with intimidation-protest tactics to force banks to lower credit standards. Its crusade, with help from Democrats in Congress, to push these high-risk "subprime" loans on banks is at the root of today's economic meltdown.
When the role of ACORN and congressional Democrats in the mortgage crisis is pointed out, Democrats reply that banks subject to the CRA represent only about a quarter of the loans that led to our current troubles. In fact, the problem goes way beyond the CRA.
As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little - since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the "secondary market."
That is, the CRA wasn't enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a downpayment.
So ACORN's Democratic friends in Congress moved to force Fannie Mae and Freddie Mac to dispense with normal credit standards. Throughout the early '90s, they imposed ever-increasing subprime-lending quotas on Fannie and Freddie.
But then the Republicans won control of Congress - and Rep. Roukema scheduled her hearing. ACORN went into action to protect its golden goose.
IT struck as Roukema aired her concerns at that hearing. Pro testers, led by ACORN President Maud Hurd, stood up and began chanting, "CRA has got to stay!" and "Banks for greed, not for need!" The protesters then demanded the microphone.
With the hearing interrupted and the demonstrators refusing to leave, Roukema called the Capital Police, who arrested Hurd and four others for "disorderly conduct in a Capital building" - a charge carrying a penalty of a $500 fine, six months in prison or both. As the police arrived, two of the protesters menacingly approached Roukema's desk, still demanding the hearing microphone.
Requests to the Capital Police to release the activists from Sen. Ted Kennedy (D-Mass.) and Rep. Joe Kennedy (D-Mass,) failed. Then Rep. Maxine Waters (D-Calif.) showed up at the jail and refused to leave until the protesters were released; the Capital Police relented.
Meanwhile, instead of repudiating ACORN's intimidation tactics, Rep. Kennedy berated Roukema for arresting one of his constituents and accused the Republicans of preparing for "an all-out attack on CRA." He also promised to introduce legislation to expand the CRA's coverage to mortgage bankers and large credit unions.
THIS little slice of political life from 1995 had a variety of ripple effects. Above all, ACORN's intimidation tactics, and its alliance with Democrats in Congress, triumphed. Despite their 1994 takeover of Congress, Republicans' attempts to pare back the CRA were stymied.
Instead, Democrats like Rep. Barney Frank (D-Mass.) and Reps. Kennedy and Waters allied with the Clinton administration to broaden the acceptability of risky subprime loans throughout the financial system, thus precipitating our current crisis.
ACORN had come to Congress not only to protect the CRA from GOP reforms but also to expand the reach of quota-based lending to Fannie, Freddie and beyond. By steamrolling the GOP that March, it had crushed the last potential barrier to "change."
Three months later, the Clinton administration announced a comprehensive strategy to push homeownership in America to new heights - regardless of the compromise in credit standards that the task would require. Fannie and Freddie were assigned massive subprime lending quotas, which would rise to about half of their total business by the end of the decade.
WHEN the ACORN-Democrat alliance finally succeeded in blocking Republicans from restoring fiscal sanity in 1995, the way was open to virtually unlimited lending quotas - and to a whole new way of thinking about credit standards.
Urged on by ACORN, congressional Democrats and the Clinton administration helped push tolerance for high-risk loans through every sector of the banking system - far beyond the sort of banks originally subject to the CRA.
So it was the efforts of ACORN and its Democratic allies that first spread the subprime virus from the CRA to Fannie and Freddie and thence to the entire financial system.
Soon, Democratic politicians and regulators actually began to take pride in lowered credit standards as a sign of "fairness" - and the contagion spread.
And when financial institutions across the board saw that they could make money by trading what would once have been considered junk loans, the profit motive kicked in. But the bad seed that started it all was ACORN.
HOW does Barack Obama fit into all of this? Obama has been a key ally of Chicago ACORN going back to his days as a community organizer.
Later, as a young lawyer, he offered leadership training to the activists who were forcing Chicago banks into high-risk subprime loans. And when he made it on to the boards of Chicago's Woods Fund and the Chicago Annenberg Challenge, he channeled money ACORN's way.
Obama was perfectly aware of ACORN's intimidation tactics - indeed, he oversaw a Woods Fund report that boasted of managing to fund the radical group despite its shocking behavior.
And as a lawmaker, in Illinois and in Washington, he has continued to back ACORN's leglislative agenda.
ACORN's high-pressure tactics live on. And congressional Democrats are still covering for ACORN, funneling it money and doing its legislative bidding. ACORN also continues its shady ways, using a vast network of technically separate but in fact quite interconnected organizations to evade federal laws on the politicized use of government money.
Perhaps most disturbing of all, the Obama campaign appears to have little more regard for freedom of speech than Reps. Kennedy or Waters did when they backed up ACORN's thugs in 1995. The campaign actually practices ACORN-style tactics, sending out "action wires" that call on supporters to block Obama critics from radio appearances (a tactic once applied to me) and demanding legal actions against unfriendly political advertisers.
As a presidential candidate, Obama promises a massive national-service program closely allied with the nonprofit sector. He wants to remove "barriers for smaller nonprofits to participate in government programs."
In other words, he plans a massive effort to funnel America's youth into volunteer work alongside the likes of ACORN. So Obama's favorite community organizers may soon be training your child.
ACORN's alliance with the Democratic Party is at the root of the current financial meltdown. And Barack Obama has stayed true to ACORN's ways.
Pretty soon, the folks who poured into the Washington Hilton to shut down Speaker Gingrich in 1995 may no longer need to take over the microphone. They'll be in charge of it.
HOW ACORN & ITS DEM ALLIES BUILT THE MORTGAGE DISASTER
Still pushing to protect junk mortgages at any cost: ACORN continues to march and rally to get Congress to support its radical agenda, as with this demonstration in Washington, DC, in March.
October 13, 2008
TO discover the roots of to day's economic crisis, consider a tale from 1995.
That March, House Speaker Newt Gingrich was scheduled to address a meeting of county commissioners at the Washington Hilton. But, first, some 500 protesters from the Association of Community Organizations for Reform Now (ACORN) poured into the ballroom from both the kitchen and the main entrance.
Hotel staffers who tried to block them were quickly overwhelmed by demonstrators chanting, "Nuke Newt!" and "We want Newt!" Jamming the aisles, carrying bullhorns and taunting the assembled county commissioners, demonstrators swiftly took over the head table and commandeered the microphone, sending two members of Congress scurrying.
The demonstrators' target, Gingrich, hadn't yet arrived - and his speech was cancelled. When the cancellation was announced, ACORN's foot soldiers cheered.
Editorial writers from Little Rock to Buffalo condemned ACORN's action as an affront to both civility and freedom of speech. Editorialists also pointed out that the "spending cuts" the protesters railed against were imaginary - Gingrich proposed merely to slow the growth in some welfare programs and turn control back to the states.
Yet ACORN had only just begun. Two days later, 50 to 100 of the same protesters hit their main target - a House Banking subcommittee considering changes to the Community Reinvestment Act, a law that allows groups like ACORN to force banks into making high-risk loans to low-credit customers.
The CRA's ostensible purpose is to prevent banks from discriminating against minorities. But Rep. Marge Roukema (R-NJ), who chaired the subcommittee, was worried that charges of discrimination had become an excuse for lowering credit standards. She warned that new, Democrat-proposed CRA regulations could amount to an illegal quota system.
FOR years, ACORN had combined manipulation of the CRA with intimidation-protest tactics to force banks to lower credit standards. Its crusade, with help from Democrats in Congress, to push these high-risk "subprime" loans on banks is at the root of today's economic meltdown.
When the role of ACORN and congressional Democrats in the mortgage crisis is pointed out, Democrats reply that banks subject to the CRA represent only about a quarter of the loans that led to our current troubles. In fact, the problem goes way beyond the CRA.
As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little - since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the "secondary market."
That is, the CRA wasn't enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a downpayment.
So ACORN's Democratic friends in Congress moved to force Fannie Mae and Freddie Mac to dispense with normal credit standards. Throughout the early '90s, they imposed ever-increasing subprime-lending quotas on Fannie and Freddie.
But then the Republicans won control of Congress - and Rep. Roukema scheduled her hearing. ACORN went into action to protect its golden goose.
IT struck as Roukema aired her concerns at that hearing. Pro testers, led by ACORN President Maud Hurd, stood up and began chanting, "CRA has got to stay!" and "Banks for greed, not for need!" The protesters then demanded the microphone.
With the hearing interrupted and the demonstrators refusing to leave, Roukema called the Capital Police, who arrested Hurd and four others for "disorderly conduct in a Capital building" - a charge carrying a penalty of a $500 fine, six months in prison or both. As the police arrived, two of the protesters menacingly approached Roukema's desk, still demanding the hearing microphone.
Requests to the Capital Police to release the activists from Sen. Ted Kennedy (D-Mass.) and Rep. Joe Kennedy (D-Mass,) failed. Then Rep. Maxine Waters (D-Calif.) showed up at the jail and refused to leave until the protesters were released; the Capital Police relented.
Meanwhile, instead of repudiating ACORN's intimidation tactics, Rep. Kennedy berated Roukema for arresting one of his constituents and accused the Republicans of preparing for "an all-out attack on CRA." He also promised to introduce legislation to expand the CRA's coverage to mortgage bankers and large credit unions.
THIS little slice of political life from 1995 had a variety of ripple effects. Above all, ACORN's intimidation tactics, and its alliance with Democrats in Congress, triumphed. Despite their 1994 takeover of Congress, Republicans' attempts to pare back the CRA were stymied.
Instead, Democrats like Rep. Barney Frank (D-Mass.) and Reps. Kennedy and Waters allied with the Clinton administration to broaden the acceptability of risky subprime loans throughout the financial system, thus precipitating our current crisis.
ACORN had come to Congress not only to protect the CRA from GOP reforms but also to expand the reach of quota-based lending to Fannie, Freddie and beyond. By steamrolling the GOP that March, it had crushed the last potential barrier to "change."
Three months later, the Clinton administration announced a comprehensive strategy to push homeownership in America to new heights - regardless of the compromise in credit standards that the task would require. Fannie and Freddie were assigned massive subprime lending quotas, which would rise to about half of their total business by the end of the decade.
WHEN the ACORN-Democrat alliance finally succeeded in blocking Republicans from restoring fiscal sanity in 1995, the way was open to virtually unlimited lending quotas - and to a whole new way of thinking about credit standards.
Urged on by ACORN, congressional Democrats and the Clinton administration helped push tolerance for high-risk loans through every sector of the banking system - far beyond the sort of banks originally subject to the CRA.
So it was the efforts of ACORN and its Democratic allies that first spread the subprime virus from the CRA to Fannie and Freddie and thence to the entire financial system.
Soon, Democratic politicians and regulators actually began to take pride in lowered credit standards as a sign of "fairness" - and the contagion spread.
And when financial institutions across the board saw that they could make money by trading what would once have been considered junk loans, the profit motive kicked in. But the bad seed that started it all was ACORN.
HOW does Barack Obama fit into all of this? Obama has been a key ally of Chicago ACORN going back to his days as a community organizer.
Later, as a young lawyer, he offered leadership training to the activists who were forcing Chicago banks into high-risk subprime loans. And when he made it on to the boards of Chicago's Woods Fund and the Chicago Annenberg Challenge, he channeled money ACORN's way.
Obama was perfectly aware of ACORN's intimidation tactics - indeed, he oversaw a Woods Fund report that boasted of managing to fund the radical group despite its shocking behavior.
And as a lawmaker, in Illinois and in Washington, he has continued to back ACORN's leglislative agenda.
ACORN's high-pressure tactics live on. And congressional Democrats are still covering for ACORN, funneling it money and doing its legislative bidding. ACORN also continues its shady ways, using a vast network of technically separate but in fact quite interconnected organizations to evade federal laws on the politicized use of government money.
Perhaps most disturbing of all, the Obama campaign appears to have little more regard for freedom of speech than Reps. Kennedy or Waters did when they backed up ACORN's thugs in 1995. The campaign actually practices ACORN-style tactics, sending out "action wires" that call on supporters to block Obama critics from radio appearances (a tactic once applied to me) and demanding legal actions against unfriendly political advertisers.
As a presidential candidate, Obama promises a massive national-service program closely allied with the nonprofit sector. He wants to remove "barriers for smaller nonprofits to participate in government programs."
In other words, he plans a massive effort to funnel America's youth into volunteer work alongside the likes of ACORN. So Obama's favorite community organizers may soon be training your child.
ACORN's alliance with the Democratic Party is at the root of the current financial meltdown. And Barack Obama has stayed true to ACORN's ways.
Pretty soon, the folks who poured into the Washington Hilton to shut down Speaker Gingrich in 1995 may no longer need to take over the microphone. They'll be in charge of it.
posted by no_slappz at 1:46 PM
2 Comments:
Those of us who have received mortgages with the participation of Fannie or Freddie (and there are MILLIONS of us) resent what you say. Without those two institutions, many of us would not be owning our homes. And, we are voters!
It was not Fannie or Freddie’s fault that the value of homes have collapsed since the bubble. That was the fault of overbuilding, and the bubble itself was largely caused by speculation. And Fannie and Freddie had nothing to do with credit default swaps, auction rate securities (which chopped down the value of several money market funds), the high rate of leverage of banks (sometimes 33-to-1), bank and investment bank assets held in “off balance sheet” companies, Etc. Who caused all that?
The SEC’s “voluntary” regulation program, the Fed’s inability to discover 33-to-1 leverage, the administration’s lack of interest in regulating derivatives.
So you say that Fannie and Freddie were supporters of Democrats? Well, the American Bankers Association gave 59% of the 24.24 million it contributed over the period 1990-early 2008 to Republicans, according to OpenSecrets.com.
Someday, the Republicans will want to win votes in the African-American community and among other minority groups. Well, this is not the way to do that. You are inferring that the ability to pay back loans among minority groups is lower than the population as a whole. Hard workers resent this!
Moreover, by far most of the sub-prime loans were made and owned by commercial mortgage companies and commercial banks. Fannie and Freddie owned some, not because they wanted to help out minorities, but because they (like Wachovia, Washington Mutual, Etc) thought that sub-prime investments would be profitable investments. This was a business motive, a capitalist motive if you will, not caused by a desire to help the poor. In fact, there is no way of knowing whether sub-prime mortgage paper is composed mainly of minority mortgages, or loans on second homes, or real estate speculation.
No, it was the Republicans who caused the financial crisis.
smrstrauss,
Like most people who ignore the difference between the Primary Cause of a problem and how the problem shows itself over time, you have decided to overlook the roots of the mortgage crisis while pretending the people who exploited the racially-driven credit relaxation started it.
The exploiters took advantage of federal legislation that lowered credit standards aimed at increasing home ownership among blacks and hispanices.
Admit it or not, the Community Reinvestment Act was passed to increase the number of mortgages given to people with substandard credit who happened to be black or hispanic.
Admit it or not, but Fannie and Freddie were required to loosen their credit standards to accept the substandard mortgages banks and other originators were required to underwrite.
My question to you is this: Would we have mortgage crisis today IF All Homebuyers Were Required to have Good Credit Scores and a 20% Down-payment?
If borrowers were merely required to cough up 20%, would we have a crisis today?
What do you think?
As far as mortgage default statistics go, there is NO question that the default rate in higher among blacks and hispanics than among whites and asian. Studies offering this conclusion come from every quarter, including the Federal Housing Administration.
Meanwhile, the Subprime Lending business is an old one. The successful players always required a big downpayment -- often 40%. They had little trouble even if they foreclosed, which was a rare event due to the owner's big equity stake.
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