I don’t know much about this. Perhaps the Libertarian ping list can provide some information.
In 1995, as a result of interest from President Clinton’s administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators’ attention on institutions’ performance in helping to meet community credit needs. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for five years. Thus in 2002, the regulators opened up the regulation for review and potential revision.
Racial inequities in mortgage acceptance rates (as reported by Inner City Press, the National Community Reinvestment Coalition, ACORN and other groups) are cited as a primary reason to maintain or even increase the scope of the CRA.
The thousands of mortgage defaults and foreclosures in the “subprime” housing market (i.e., mortgage holders with poor credit ratings) is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call “communities of color” that they might not otherwise make based on purely economic criteria.
The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various “neighborhood organizations,” as they like to call themselves, such as “ACORN” (Association of Community Organizations for Reform Now). These organizations claim that over $1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty. A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act.
So-called “community groups” like ACORN benefit themselves from the CRA through a process that sounds like legalized extortion. The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA “protest” is issued by a “community group.” This can cost banks great sums of money, and the “community groups” understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.
A man named Bruce Marks became quite notorious during the last decade for pressuring banks to earmark literally billions of dollars to his organization, the “Neighborhood Assistance Corporation of America.” He once boasted to the New York Times that he had “won” loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group. And that is just one “community group” operating in one city Boston.
Dont expect to read about this in the “mainstream media,” however, which generally views groups like ACORN as heroic champions of the poor, laws like the CRA as anti-discrimination laws, and places all of the blame for the subprime mortgage meltdown on greedy capitalists, especially mortgage brokers. Encouraged by such reporting, the odious Senator Charles Schumer of New York has promised federal legislation that will reign in these miscreants
September 6, 2007
Thomas J. DiLorenzo professor of economics at Loyola College in Maryland and the author of The Real Lincoln:
I wonder if these revisions required an act of Congress or if Clinton was solely responsible.
They made a hell of a lot of money from what amounted to hot air and now that the entire card house has collapsed the taxpayers are left holding the bag.
Pardon me for mixing metaphors and going populist, but I'm pissed!
Here's another thing to consider: We're now looking at $1 trillion dollar deficits in the coming years because of these bailouts, and that gives a potential President Obama and his rubber stamp Democratic congress carte blanche to raise taxes to the skies. If that doesn't sober us up nothing will.
Once upon a time H. Ross Perot heard a giant sucking sound. Now I hear a giant toilet bowl flushing on our economy and our whole gosh darned nation.
The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities
The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American citiesand, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation’s banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.
The Act, which Jimmy Carter signed in 1977, grew out of the complaint that urban banks were “redlining” inner-city neighborhoods, refusing to lend to their residents
In addition, the Act’s backers claimed, CRA would be profitable for banks. They just needed a push from the law to learn how to identify profitable inner-city lending opportunities.
A September 1999 study by Freddie Mac, for instance, confirmed what previous Federal Reserve and Federal Deposit Insurance Corporation studies had found: that African-Americans have disproportionate levels of credit problems, which explains why they have a harder time qualifying for mortgage money. As Freddie Mac found, blacks with incomes of $65,000 to $75,000 a year have on average worse credit records than whites making under $25,000.
The Federal Reserve Bank of Dallas had it right when it saidin a paper pointedly entitled “Red Lining or Red Herring?””the CRA may not be needed in today’s financial environment to ensure all segments of our economy enjoy access to credit.” True, some householdsthose with a history of credit problems, for instance, or those buying homes in neighborhoods where re-selling them might be difficultmay not qualify for loans at all, and some may have to pay higher interest rates, in reflection of higher risk. But higher rates in such situations are balanced by lower house prices. This is not a conspiracy against the poor; it’s how markets measure risk and work to make credit available.
But for advocacy groups that were in the complaint business, the Clinton administration regulations offered a formal invitation. The National Community Reinvestment Coalitiona foundation-funded umbrella group for community activist groups that profit from the CRAissued a clarion call to its members in a leaflet entitled “The New CRA Regulations: How Community Groups Can Get Involved.” “Timely comments,” the NCRC observed with a certain understatement, “can have a strong influence on a bank’s CRA rating.”
The Senate Banking Committee has estimated that, as a result of CRA, $9.5 billion so far has gone to pay for services and salaries of the nonprofit groups involved. To deal with such groups and to produce CRA compliance data for regulators, banks routinely establish separate CRA departments. A CRA consultant industry has sprung up to assist them. New financial-services firms offer to help banks that think they have a CRA problem make quick “investments” in packaged portfolios of CRA loans to get into compliance.
The result of all this activity, argues the CEO of one midsize bank, is that “banks are promising to make loans they would have made anyway, with some extra aggressiveness on risky mortgages thrown in.” Many bankersand even some CRA advocatesshare his view. As one Fed economist puts it, the assertion that CRA was needed to force banks to see profitable lending opportunities is “like saying you need the rooster to tell the sun to come up. It was going to happen anyway.”
There is no more important player in the CRA-inspired mortgage industry than the Boston-based Neighborhood Assistance Corporation of America. Chief executive Bruce Marks has set out to become the Wal-Mart of home mortgages for lower-income households. Using churches and radio advertising to reach borrowers, he has made NACA a brand name nationwide, with offices in 21 states, and he plans to double that number within a year. With “delegated underwriting authority” from the banks, NACA itselfnot the banksdetermines whether a mortgage applicant is qualified, and it closes sales right in its own offices. It expects to close 5,000 mortgages next year, earning a $2,000 origination fee on each. Its annual budget exceeds $10 million.
Marks, a Scarsdale native, NYU MBA, and former Federal Reserve employee, unabashedly calls himself a “bank terrorist”his public relations spokesman laughingly refers to him as “the shark, the predator,” and the NACA newspaper is named the Avenger. They’re not kidding: bankers so fear the tactically brilliant Marks for his ability to disrupt annual meetings and even target bank executives’ homes that they often call him to make deals before they announce any plans that will put them in CRA’s crosshairs. A $3 billion loan commitment by Nationsbank, for instance, well in advance of its announced merger with Bank of America, “was a preventive strike,” says one NACA spokesman.
Marks is unhesitatingly candid about his intent to use NACA to promote an activist, left-wing political agenda. NACA loan applicants must attend a workshop that celebratesto the accompaniment of gospel musicthe protests that have helped the group win its bank lending agreements. If applicants do buy a home through NACA, they must pledge to assist the organization in five “actions” annuallyanything from making phone calls to full-scale “mobilizations” against target banks, “mau-mauing” them, as sixties’ radicals used to call it. “NACA believes in aggressive grassroots advocacy,” says its Homebuyer’s Workbook.
During the Reagan years, the Right used to talk of cutting off the flow of federal funds to left-liberal groups, a goal called “defunding the Left”; through the CRA, the Clinton administration has found a highly effective way of doing exactly the opposite, funneling millions to NACA or to outfits like ACORN, which advocates a nationalized health-care system, “people before profits at the utilities,” and a tax code based “solely on the ability to pay.”
MUCH, MUCH MORE HERE...
ENTITLEMENT CULTURE GONE MAD
April 2, 2008
LAST week, a mob of screeching protesters invaded the Bear Stearns headquarters in Manhattan demanding more aid for homeowners. As you know, I oppose federal bailouts of every make and model - and that includes both the Bear Stearns deal and the bipartisan stimulus-palooza in Washington.
Here is the face of the entitlement culture gone mad: “We will go to their neighborhood, we will educate their children on what their parents do. They should be ashamed,” said Neighborhood Assistance Corporation of America (NACA) founder Bruce Marks in a nasty warning issued to employees of both banks.
This isn’t an idle threat. Bruce Marks is no harmless lone nut. He has a record of showing up at children’s schools and bullying them because of their parents’ employment. All in the name of “social justice,” of course, and securing loans for every last bad risk on the face of the planet. He’s so proud of his behavior, he calls himself a “bank terrorist.”
It’s all about the money for Marks’ group, which browbeats banks and lenders into billion-dollar deals to allow its activists to arrange mortgages for their high-risk constituents. NACA - with dozens of offices across the country - has a no-down-payment, no-closing-costs, low-interest-rate policy for low-income minority borrowers and takes a hefty fee for each transaction.
Marks had attended the Senate Banking Committee hearing with 400 angry residents from various states, many armed with tales of injustice wrought by Fleet. The protesters, who included gospel singers and Baptist ministers, sang and chanted as they paraded in wearing bright yellow T-shirts depicting a loan shark.
“It was like a gospel revival meeting,” Marks said. “I don’t know if ever there’s been a committee meeting where 400 people just took it over.”
the hearing was a step in a series of actions by Marks and other activists that ultimately led Fleet to agree to an $8 billion initiative for low and moderate-income borrowers.
“CRA says credit is the lifeblood of the community,” Marks continued. “Every individual and community has the right to credit it’s what allows communities to grow and prosper.”
Using the CRA effectively is not rocket science, Marks said, but it requires good organizing and a willingness to dig in for the long haul. The idea is to bombard lenders with the threat of negative publicity until they’re worn down.
“You’ve got to have a long attention span,” Marks said. “Because everybody’s got a breaking point.”
For Fleet, the last straw came when Marks and 15 colleagues infiltrated a speaking engagement by Fleet Chairman Terrance Murray in the fall of 1993. Murray was addressing a reception for leaders of the finance community, sponsored by the Harvard Business School at the Newton, Massachusetts, Marriot. Marks said that after he and several others stood up, confronted Murray, and “educated” the audience on Fleet’s misdeeds, Fleet finally agreed to negotiate.
Not only did Marks end up negotiating a lending agreement, but Fleet also made UNAC administrator of a $140-million loan program for low- and moderate-income homebuyers.
The Boston Globe quoted Senator Wilkerson as calling Marks “the kind of person who would throw a Molotov cocktail and then run in with a fire extinguisher and declare himself the hero for putting out the fire.”
“Let them tell all the people who’ve purchased homes [because of UNAC’s program] that they didn’t deserve homes we’d love to have that public debate,” Marks said, adding that his critics are more interested in their egos than winning real benefits for the community.
Marks added that once banks are forced to offer low- and moderate-income people fair access to credit, they come forward and concede that investing in communities is a good idea, and good for business. UNAC’s role, according to Marks, is to get banks’ attention in order to show that there is a constructive alternative to exploiting and excluding people. “But the way you get their attention,” he said, “is to be in their face all the time.
Housing Activist Bruce Marks Named the Boston Globe Magazine’s Bostonian of the Year for 2007
In a special edition appearing Sunday December 30, The Boston Globe Magazine selects housing activist Bruce Marks as its 2007 Bostonian of the Year. In choosing Mr. Marks, the Globe Magazine cites “his relentless advocacy and sensible innovation in working to find a way out of the mortgage crisis that affects so many.”
Hundreds of politicians and former politicians need to be in jail and/or thrown out of office in disgrace. Mortgage and banking thieves all the way down the ladder need to go to jail as well. When will the American people demand accountability for this national disgrace? They’ve stolen our children’s futures and Osama Obama wants to accelerate that process. God help us all!
A couple of days ago, Rush played an audio of an interview with
Robert B. Reiche (of the Clinton Admin.)
IIRC, it was a pretty recent interview.
And it just blew me away as Reiche said that Bill Clinton had really
gotten the housing mortgage debacle rolling...by threatening private
lenders if they didn’t start approving plenty of home loans in minority area.
I almost had a heart attack. As NOTHING is every the fault of Democrats.
And if you don’t believe that...just ask a Democrat.
Consider this press release from Citigroup in September of 2004, which finds ACORN and Citi happily holding hands and pushing the goals of both organizations to promote homeownership in low- and moderate-income neighborhoods, especially in immigrant communities.
From the press statement:
With this agreement, ACORN will be able to expand our mission of strengthening communities by helping low- and moderate-income families, including new immigrants to this country, become homeowners, said Maude Hurd, National President of ACORN.
Its not as if Citi and ACORN were the only ones jumping deep into subprime lending together, either. Economic policy research at the time centered on how lenders were denying loans to those with poor credit, often minorities; consider the following conclusion from a September 1999 study:
The Urban Institute report issued today says that not all Americans enjoy equal access to the benefits of homeownership, in part because of unequal access to capital.
Fair lending essentially became synonymous with a universal lowering of credit standards and as lenders loosened credit standards, community groups cheered, and the White House lauded the commitment to expanding homeownership.
Legislatively, President Bush went so far as to propose eliminating down payment requirements altogether. In a September 2004 press statement, administration officials touted a so-called Zero-Downpayment Initiative that would eliminate the statutory requirement of a minimum three percent down payment for FHA-insured single-family mortgages for first-time homebuyers.
Even when we had clear data suggesting that lending to people who couldnt afford their loans would likely end up badly, we ignored it. Consider this story from April 2004, which noted a Fannie Mae study that found that 49 percent of English-language Hispanics, 46 percent of Spanish-language Hispanics, and 42 percent of African Americans cited credit concerns as the primary reason they had not yet bought a home.
That sense of entitlement has given traction to guys like Bruce Marks at the Neighborhood Assistance Corporation of America, whose boorish tactics would be universally condemned at any other point in our nations history. Instead, the use of those tactics get him named Bostonian of the Year by the Boston Globe, and find him putting banks in a veritable vise grip perhaps even rightfully so over their lending tactics.
EVERYONE: Freep the Gretawire.com poll asking whether Todd Palin should honor the Witch-hunt subpoena issued against him! (HINT: “NO”) - Just takes ten seconds and a mouse click.
See here. Community Reinvestment Act
No lender was compelled to make a bad loan under CRA, borrowers were qualified for their loans using standard procedures with regard to credit worthiness and DTI. Furthermore lenders did not make CRA loans available to outside mortgage brokers or wholesalers where much of the preditory and abusive practices took place.
The simple fact is that Donald Trump could qualify for a CRA loan provided the property he was puchasing was located in an underserved location. To blame CRA lending for the credit/mortgage crisis we're facing is simplistic and misleading.
Affirmative Action home loans- the cause of this mess that we are observing in the financial markets this week.
So we have blamed Clinton and are heading towards blaming Johnson.
What did we do in the last 8 years to stop any of this from happening?
As a result by 1995 80% of sub-prime loans were being made by essentially unregulated independent mortgage companies or affiliates of banks or thrifts, which were subject - depending on their method of organization - to either minimal federal supervision (including CRT requirements)or to none at all.
As for underwriting standards, I've not seem more recent figures, but at least as late as 1995 there was little if evidence that loans made to archive CRT requirements were especially prone to non-performance, and I suspect that when this all shakes out the smaller, local institutions subject to CRT scrutiny will have been shown to have better evaluated borrowers than larger unrelated institutions such as Countrywide.
In an unregulated environment of ultimately securitized lending no-one was subject to long-term market discipline short of the melt-down we are now encountering. This was a quire straight-forward case of market failure, completely predictable, and likely to repeated in the future as it has been in the past once the current lessons are unlearned by financial engineers two generations hence.