Monday, September 29, 2008


Stanley Kurtz takes a look at how the Community Reinvestment Act was used by activist groups to pressure banks into lending money to high-risk applicants, and how “community organizers” like ACORN played a front-line role. ACORN insinuated itself into the process by using CRA to block bank sales and mergers and force lending institutions to lower standards for applicants. They also championed the sale of these loans to Fannie Mae as a key program that would alleviate the lenders of any risk in lending:

"CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in “subprime” loans to often uncreditworthy poor and minority customers.

Any bank that wants to expand or merge with another has to show it has complied with CRA - and approval can be held up by complaints filed by groups like ACORN.

In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America’s financial institutions.

Banks already overexposed by these shaky loans were pushed still further in the wrong direction when government-sponsored Fannie Mae and Freddie Mac began buying up their bad loans and offering them for sale on world markets.

Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster."

No comments: