When I was young, jobs grown-ups had were doctors, plumbers, lawyers, dentists, stock brokers and so on. I had never heard of “Community Organizer” until this Presidential season. How does a Community Organizer get paid? How is this work relevant to current financial conditions?
The present subprime financial strains have as its genesis the policies promoted in the Community Reinvestment Act (CRA), compliance with which is a prerequisite for financial institution innovation. The CRA requires the “[A]ppropriate Federal financial supervisory agency” to assess a financial institution’s record of “[m]eeting the credit needs of its entire community, including low- and moderate-income neighborhoods…” 12 U.S.C. § 2903. The supervising agency then, “[S]hall prepare a written evaluation of the institution’s record of meeting the credit needs of its entire community, including low-and moderate-income neighborhoods. 12 U.S.C. § 2906(a)(1). In this report, it assigns a rating of: “outstanding”; “satisfactory”; “needs to improve”; or “substantial noncompliance.” 12 U.S.C. 2906(b)(2).
Under the regulatory scheme, the FDIC assesses the CRA performance of a bank based upon lending, investment, and service tests. 12 CFR § 345.24(a)(1). The FDIC evaluates the performance of a bank in predetermined “assessment areas.” 12 C.F.R. § 345.41. The FDIC takes into account any views expressed by “interested parties” in considering CRA performance. 12 C.F.R. § 345.29(c).
Alternatively, financial institutions may submit a “strategic plan.” 12 C.F.R. § 345.27. As part of this submission, “[A] bank shall … [i]nformally seek suggestions from members of the public in its assessment area(s) covered by the plan while developing the plan.” 12 C.F.R. § 345.27(d)(1).
Gramm-Leach-Bliley Financial Services Modernization Act, passed 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.
To move from the abstract to the concrete, we can look to, for example, a Sept. 20, 2004 press release, “Citigroup and ACORN Sign Groundbreaking Agreement to Expand Access to Financial Services in Communities Around the Country”. There Citibank touted 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.
We now call real estate secured loans issued in compliance with these programs, “Subprime.”
Barak Obama has had an intimate and long-term association with ACORN. Acorn’s Madeleine Talbot first drew Mr. Obama into his alliance with ACORN. Toni Foulkes, a Chicago Acorn leader, has described that it specifically sought out Mr. Obama’s representation in a case it filed seeking to force the State of Illinois to comply with motor voter requirements. Mr. Foulkes likewise makes it clear that Mr. Obama’s post-law school role organizing “Project VOTE” in 1992 was undertaken in direct partnership with ACORN. Likewise, Mr. Obama’s volunteered his services yearly a key figure in Acorn’s leadership-training seminars. Furthermore, Obama’s service on the boards of Woods Fund and the Joyce Foundation allowed him to help direct tens of millions of dollars in grants to various liberal organizations, including Chicago Acorn, whose endorsement Obama sought and won in his State Senate race.
So, the “Community Reinvestment Act” seeks input from “Community Organizers” like ACORN in rating financial institutions on their compliance in issuing subprime loans. Without satisfying “Community Organizers,” financial institutions cannot escape depression era restrictions on innovation. What is the price of this satisfaction? Today it seems to be the federal bailout of Fannie Mae and Freddie Mac, at the cost of billions of taxpayer dollars.
Newt was the only R leader in the past 20 years who had the Left totally pegged. He was onto all this.
The banks had to pay off in millions, in cash and future commitments, in order for them to “permit” the Federal Reserve to consider the bank's mergers, acquisitions or plans for growth. Barack Obama and other Chicago personalities have done quite well, to put it mildly, from the housing and community investment racket (see Rezko, et. al.)
bump for later
When are they going to put ACORN out of business?
Damn - the Carter Administration is like a one night stand with Herpes. We had him once for a brief time, 30 years ago, and we are still having outbreaks of the disease he gave us.
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