[Vision2020] the Truth About ACORN

No Weatherman no.weatherman at gmail.com
Fri Oct 10 09:34:11 PDT 2008


Planting Seeds of Disaster
ACORN, Barack Obama, and the Democratic Party
By Stanley Kurtz

"You've got only a couple thousand bucks in the bank. Your job pays
you dog-food wages. Your credit history has been bent, stapled, and
mutilated. You declared bankruptcy in 1989. Don't despair: You can
still buy a house." So began an April 1995 article in the Chicago
Sun-Times that went on to direct prospective home-buyers fitting this
profile to a group of far-left "community organizers" called ACORN,
for assistance. In retrospect, of course, encouraging customers like
this to buy homes seems little short of madness.

Militant ACORN
At the time, however, that 1995 Chicago newspaper article represented
something of a triumph for Barack Obama. That same year, as a director
at Chicago's Woods Fund, Obama was successfully pushing for a major
expansion of assistance to ACORN, and sending still more money ACORN's
way from his post as board chair of the Chicago Annenberg Challenge.
Through both funding and personal-leadership training, Obama supported
ACORN. And ACORN, far more than we've recognized up to now, had a
major role in precipitating the subprime crisis.

I've already told the story of Obama's close ties to ACORN leader
Madeline Talbott, who personally led Chicago ACORN's campaign to
intimidate banks into making high-risk loans to low-credit customers.
Using provisions of a 1977 law called the Community Reinvestment Act
(CRA), Chicago ACORN was able to delay and halt the efforts of banks
to merge or expand until they had agreed to lower their credit
standards — and to fill ACORN's coffers to finance "counseling"
operations like the one touted in that Sun-Times article. This much
we've known. Yet these local, CRA-based pressure-campaigns fit into a
broader, more disturbing, and still under-appreciated national
picture. Far more than we've recognized, ACORN's local, CRA-enabled
pressure tactics served to entangle the financial system as a whole in
the subprime mess. ACORN was no side-show. On the contrary, using CRA
and ties to sympathetic congressional Democrats, ACORN succeeded in
drawing Fannie Mae and Freddie Mac into the very policies that led to
the current disaster.

In one of the first book-length scholarly studies of ACORN, Organizing
Urban America, Rutgers University political scientist Heidi Swarts
describes this group, so dear to Barack Obama, as "oppositional
outlaws." Swarts, a strong supporter of ACORN, has no qualms about
stating that its members think of themselves as "militants unafraid to
confront the powers that be." "This identity as a uniquely militant
organization," says Swarts, "is reinforced by contentious action."
ACORN protesters will break into private offices, show up at a
banker's home to intimidate his family, or pour protesters into bank
lobbies to scare away customers, all in an effort to force a lowering
of credit standards for poor and minority customers. According to
Swarts, long-term ACORN organizers "tend to see the organization as a
solitary vanguard of principled leftists . . . the only truly radical
community organization."

ACORN's Inside Strategy
Yet ACORN's entirely deserved reputation for militance is balanced by
its less-well-known "inside strategy." ACORN has long employed
Washington-based lobbyists who understand very well how the
legislative game is played. ACORN's national lobbyists may encourage
and benefit from the militant tactics of their base, but in the halls
of congress they play the game with smooth sophistication. The untold
story of ACORN's central role in the financial meltdown is about the
one-two punch to the banking system administered by this
outside/inside strategy.

Critics of the notion that CRA had a major impact on the subprime
crisis ask how a law passed in 1977 could have caused a crisis in
2008? The answer has a lot to do with ACORN — and the critical years
of 1990–1995. While the 1977 Community Reinvestment Act did call on
banks to increase lending in poor and minority neighborhoods, its
exact requirements were vague, and therefore open to a good deal of
regulatory interpretation. Banks merger or expansion plans were rarely
held up under CRA until the late 1980s, when ACORN perfected its
technique of filing CRA complaints in tandem with the sort of
intimidation tactics perfected by that original "community organizer"
(and Obama idol), Saul Alinsky.

At first, ACORN's anti-bank actions were relatively few in number.
However, under a provision of the 1989 savings and loan bailout pushed
by liberal Democratic legislators, like Massachusetts Congressman
Joseph P. Kennedy, lenders were required to compile public records of
mortgage applicants by race, gender, and income. Although the
statistics produced by these studies were presented in highly
misleading ways, groups like ACORN were able to use them to embarrass
banks into lowering credit standards. At the same time, a wave of
banking mergers in the early 1990's provided an opening for ACORN to
use CRA to force lending changes. Any merger could be blocked under
CRA, and once ACORN began systematically filing protests over minority
lending, a formerly toothless set of regulations began to bite.

ACORN's efforts to undermine credit standards in the late 1980s taught
it a valuable lesson. However much pressure ACORN put on banks to
lower credit standards, tough requirements in the "secondary market"
run by Fannie Mae and Freddie Mac served as a barrier to change.
Fannie Mae and Freddie Mac buy up mortgages en masse, bundle them, and
sell them to investors on the world market. Back then, Fannie and
Freddie refused to buy loans that failed to meet high credit
standards. If, for example, a local bank buckled to ACORN pressure and
agreed to offer poor or minority applicants a 5-percent down-payment
rate, instead of the normal 10-20 percent, Fannie and Freddie would
refuse to buy up those mortgages. That would leave all the risk of
these shaky loans with the local bank. So again and again, local banks
would tell ACORN that, because of standards imposed by Fannie and
Freddie, they could lower their credit standards by only a little.

So the eighties taught ACORN that a high-pressure, Alinskyite outside
strategy wouldn't be enough. Their Washington lobbyists would have to
bring inside pressure on the government to undercut credit standards
at Fannie Mae and Freddie Mac. Only then would local banks consider
making loans available to customers with bad credit histories, low
wages, virtually nothing in the bank, and even bankruptcies on record.

Democrats and ACORN
As early as 1987, ACORN began pressuring Fannie and Freddie to review
their standards, with modest results. By 1989, ACORN had lured Fannie
Mae into the first of many "pilot projects" designed to help local
banks lower credit standards. But it was all small potatoes until the
serious pressure began in early 1991. At that point, Democratic
Senator Allan Dixon convened a Senate subcommittee hearing at which an
ACORN representative gave key testimony. It's probably not a
coincidence that Dixon, like Obama, was an Illinois Democrat, since
Chicago has long been a stronghold of ACORN influence.

Dixon gave credibility to ACORN's accusations of loan bias, although
these claims of racism were disputed by Missouri Republican,
Christopher Bond. ACORN's spokesman strenuously complained that his
organization's efforts to relax local credit standards were being
blocked by requirements set by the secondary market. Dixon responded
by pressing Fannie and Freddie to do more to relax those standards —
and by promising to introduce legislation that would ensure it. At
this early stage, Fannie and Freddie walked a fine line between
promising to do more, while protesting any wholesale reduction of
credit requirements.

By July of 1991, ACORN's legislative campaign began to bear fruit. As
the Chicago Tribune put it, "Housing activists have been pushing hard
to improve housing for the poor by extracting greater financial
support from the country's two highly profitable secondary
mortgage-market companies. Thanks to the help of sympathetic
lawmakers, it appeared . . . that they may succeed." The Tribune went
on to explain that House Democrat Henry Gonzales had announced that
Fannie and Freddie had agreed to commit $3.5 billion to low-income
housing in 1992 and 1993, in addition to a just-announced $10 billion
"affordable housing loan program" by Fannie Mae. The article
emphasizes ACORN pressure and notes that Fannie and Freddie had been
fighting against the plan as recently as a week before agreement was
reached. Fannie and Freddie gave in only to stave off even more
restrictive legislation floated by congressional Democrats.

A mere month later, ACORN Housing Corporation president, George Butts
made news by complaining to a House Banking subcommittee that ACORN's
efforts to pressure banks using CRA were still being hamstrung by
Fannie and Freddie. Butts also demanded still more data on the race,
gender, and income of loan applicants. Many news reports over the
ensuing months point to ACORN as the key source of pressure on
congress for a further reduction of credit standards at Fannie Mae and
Freddie Mac. As a result of this pressure, ACORN was eventually
permitted to redraft many of Fannie Mae and Freddie Mac's loan
guideline.

Clinton and ACORN
ACORN's progress through 1992 depended on its Democratic allies.
Whatever ACORN managed to squeeze out of the George H. W. Bush
administration came under congressional pressure. With the advent of
the Clinton administration, however, ACORN's fortunes took a positive
turn. Clinton Housing Secretary Henry Cisnersos pledged to meet
monthly with ACORN representatives. For ACORN, those meetings bore
fruit.

Another factor working in ACORN's favor was that its increasing
success with local banks turned those banks into allies in the battle
with Fannie and Freddie. Precisely because ACORN's local pressure
tactics were working, banks themselves now wanted Fannie and Freddie
to loosen their standards still further, so as to buy up still more of
the high-risk loans they'd made at ACORN's insistence. So by the 1993,
a grand alliance of ACORN, national Democrats, and local bankers
looking for someone to lessen the risks imposed on them by CRA and
ACORN were uniting to pressure Fannie and Freddie to loosen credit
standards still further.

At this point, both ACORN and the Clinton administration were working
together to impose large numerical targets or "set asides" (really a
sort of poor and minority loan quota system) on Fannie and Freddie.
ACORN called for at least half of Fannie and Freddie loans to go to
low-income customers. At first the Clinton administration offered a
set-aside of 30 percent. But eventually ACORN got what it wanted. In
early 1994, the Clinton administration floated plans for committing $1
trillion in loans to low- and moderate-income home-buyers, which would
amount to about half of Fannie Mae's business by the end of the
decade. Wall Street Analysts attributed Fannie Mae's willingness to go
along with the change to the need to protect itself against still more
severe "congressional attack." News reports also highlighted praise
for the change from ACORN's head lobbyist, Deepak Bhargava.

This sweeping debasement of credit standards was touted by Fannie
Mae's chairman, chief executive officer, and now prominent Obama
adviser James A. Johnson. This is also the period when Fannie Mae
ramped up its pilot programs and local partnerships with ACORN, all of
which became precedents and models for the pattern of risky subprime
mortgages at the root of today's crisis. During these years, Obama's
Chicago ACORN ally, Madeline Talbott, was at the forefront of
participation in those pilot programs, and her activities were
consistently supported by Obama through both foundation funding and
personal leadership training for her top organizers.

Finally, in June of 1995, President Clinton, Vice President Gore, and
Secretary Cisneros announced the administration's comprehensive new
strategy for raising home-ownership in America to an all-time high.
Representatives from ACORN were guests of honor at the ceremony. In
his remarks, Clinton emphasized that: "Out homeownership strategy will
not cost the taxpayers one extra cent. It will not require
legislation." Clinton meant that informal partnerships between Fannie
and Freddie and groups like ACORN would make mortgages available to
customers "who have historically been excluded from homeownership."

Disaster
In the end of course, Clinton's plan cost taxpayers an almost
unimaginable amount of money. And it was just around the time of his
1995 announcement that the Chicago papers started encouraging
bad-credit customers with "dog-food" wages, little money in the bank,
and even histories of bankruptcy to apply for home loans with the help
of ACORN. At both the local and national levels, then, ACORN served as
the critical catalyst, levering pressure created by the Community
Reinvestment Act and pull with Democratic politicians to force Fannie
Mae and Freddie Mac into a pattern of high-risk loans.

Up to now, conventional wisdom on the financial meltdown has relegated
ACORN and the CRA to bit parts. The real problem, we've been told, lay
with Fannie Mae and Freddie Mac. In fact, however, ACORN is at the
base of the whole mess. ACORN used CRA and Democratic sympathizers to
entangle Fannie and Freddie and the entire financial system in a
disastrous disregard of the most basic financial standards. And Barack
Obama cut his teeth as an organizer and politician backing up ACORN's
economic madness every step of the way.
— Stanley Kurtz is a senior fellow at the Ethics and Public Policy Institute.
http://article.nationalreview.com/?q=ZjRjYzE0YmQxNzU4MDJjYWE5MjIzMTMxMmNhZWQ1MTA=



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