JHS

I have to intervene to laugh at the suggestion that ACORN caused the subprime loan crisis. I am not a big fan of ACORN, but I used to be neighbors and friends with the person at ACORN most responsible for mortgage policy. At the time, one of my clients was a successful subprime lender. I used to argue the theory and practice of subprime lending with the ACORN guy (who was very smart, very dedicated, and a lovely person), and he was about 50 times more conservative about lending than anyone at my client. If ACORN ruled the world, subprime lending would never have existed.

And, hey barrons, do you actually KNOW any community organizers? I do. There are shakedown artists out there, and morons, too, but also plenty of smart, energetic, idealistic people who often do actual good things, and have good reputations. One of the best I know -- an Afro-Cuban-American woman -- is even (gasp!) a REPUBLICAN, who supported Mike Huckabee, and worries that McCain isn't conservative enough. Another revived a troubled neighborhood group, then ran a city department, then was CEO of the local United Way, from which she was recruited to a management position at a huge mutual fund group whose CEO dealt with her at United Way. There are competent people out there who actually figure out how to make things work at the level where it really counts.

collegemom16

On September 20, 2004 a press release stated:

“Citigroup and ACORN Sign Groundbreaking Agreement to Expand Access to Financial Services in Communities Around the Country”.

In this press release Citibank announced that it and Association of Community Organizations for Reform Now (ACORN) agreed to collaborate on several initiatives, including:

— Form an affordable mortgage-lending program between Citigroup and ACORN Housing Corp. (AHC) to develop a specialized mortgage product for all AHC’s homeownership centers, and make mortgages available to immigrants who have previously been shut out of credit markets.

Focus on community development lending to increase affordable housing in areas where the Citibank Community Development and ACORN footprints coincide.

Provide borrowers with access to the best combination of loan product, price, service, and attributes.

Establish a net-benefit test for real estate secured loans.

Currently real estate secured loans issued in compliance with these programs are called “Subprime.”

mini

The subprime problem was not caused by the demand for loans, but the demand for new places for surplus funds created by the Bush/McPOW tax cuts (actually, just big loans from abroad) to be invested at relatively high rates of return, and due to Gramm/McPOW, deregulation of same.

collegemom16

Gramm-Leach-Bliley Financial Services Modernization Act, passed during Clinton’s presidency in 1999, makes the CRA ratings assigned by a supervising authority of critical importance to financial institutions. One of the reforms under Gramm-Leach-Bliley is the repeal of the depression era Glass-Steagall Act , which prohibited combining insurance and securities companies. However, under Gramm-Leach-Bliley, regulators may withhold authorization for a financial institution to enter into new lines of business, based upon its CRA ratings.


Thus, multi-billion dollar transactions may rise or fall based upon the input of “community organizations.” For example, Bruce Marks of the Neighborhood Assistance Corporation of America won loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group in one city, Boston.

LakeWashington

Hmmm. Last night on Larry King's show, Ben Stein, who is quite angry with his party AND the Democrats, said that Frank Raines tried to warn Congress years ago and was ignored.