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 cities—and, 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 Clinton administration's get-tough regulatory regime mattered so crucially because bank deregulation had set off a wave of mega-mergers, including the acquisition of the Bank of America by NationsBank, BankBoston by Fleet Financial, and Bankers Trust by Deutsche Bank. Regulatory approval of such mergers depended, in part, on positive CRA ratings. "To avoid the possibility of a denied or delayed application," advises the NCRC in its deadpan tone, "lending institutions have an incentive to make formal agreements with community organizations."A radical group called ACORN Housing has a $760 million commitment from the Bank of New York; the Boston-based Neighborhood Assistance Corporation of America has a $3-billion agreement with the Bank of America; a coalition of groups headed by New Jersey Citizen Action has a five-year, $13-billion agreement with First Union Corporation. Similar deals operate in almost every major U.S. city. Observes Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, which has $220 million in bank mortgage money to parcel out, "CRA is the backbone of everything we do."
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."
A down-payment requirement, based on concern as to whether a borrower can make payments, is—when applied to low-income minority buyers—"patronizing and almost racist," Marks says.
This policy—"America's best mortgage program for working people," NACA calls it—is an experiment with extraordinarily high risks. There is no surer way to destabilize a neighborhood than for its new generation of home buyers to lack the means to pay their mortgages—which is likely to be the case for a significant percentage of those granted a no-down-payment mortgage based on their low-income classification rather than their good credit history.
Looking into the future gives further cause for concern: "The bulk of these loans," notes a Federal Reserve economist, "have been made during a period in which we have not experienced an economic downturn." The Neighborhood Assistance Corporation of America's own success stories make you wonder how much CRA-related carnage will result when the economy cools.It will take a Republican president to change or abolish CRA, so firmly wedded to it is the Clinton administration and so powerfully does it serve Democratic Party interests.
Well, we're all seeing what happens when the economy cools. We're also seeing the results of a Republican President and 8 years bi-partisan congressional efforts that not only did not change CRA but actually encouraged it's expansion into the broader marketplace. The complicity of those entrusted to oversee the programs, the corruption brought about by the prospect of massive paydays for the executives funding the programs and the greed rampant at every level of a society hell bent to 'get mine first' has taken this formerly well-intentioned program and wrought hellacious consequences.
Again, I'm not using this to point fingers at either Democrat or Republican leaders, who have all been MIA. But this mess predates the Bush era and in fact has it's roots in the 1977 signature by Jimmy Carter of the Community Redevelopment Act. Somebody might want to remind La Pelous of that fact before her next public outbreak - provided she still has her job by the end of the week. You'll find a lot of familiar names in this article, like the ACORN folks who are lining up for more cash today and are close pals with Obama. Read the article - it's a nice bit of ancient history (2000) that's pretty relevant today. The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities
We're having some fun now, eh?
Comments (2)Subscribe to CommentsComment