Tuesday, October 7, 2008

A handy dandy timeline of disaster!

Obama, ACORN, and our economic meltdown.

Question: what does a community organizer do?

I wish that we could just laugh at this like it was some meaningless bit of fluff Obama inserted into his other wise sparse resume. The truth is, Obama is both highly experienced and devastatingly effective at community organizing; unfortunately, it's not the kind of organizing that most peace loving, self reliant Americans want going on in their communities.

Over at the National Review, Stanley Kurtz has an excellent analysis of the role of Obama and ACORN in the current subprime mortgage meltdown.

Planting Seeds of Disaster
ACORN, Barack Obama, and the Democratic party. By Stanley Kurtz

You’ve got only a couple thousand bucks in the bank. Your job pays you dog-food wages. Your credit history has been bent, stapled, and mutilated. You declared bankruptcy in 1989. Don’t despair: You can still buy a house.” So began an April 1995 article in the Chicago Sun-Times that went on to direct prospective home-buyers fitting this profile to a group of far-left “community organizers” called ACORN, for assistance. In retrospect, of course, encouraging customers like this to buy homes seems little short of madness.

Militant ACORN
At the time, however, that 1995 Chicago newspaper article represented something of a triumph for Barack Obama. That same year, as a director at Chicago’s Woods Fund, Obama was successfully pushing for a major expansion of assistance to ACORN, and sending still more money ACORN’s way from his post as board chair of the Chicago Annenberg Challenge. Through both funding and personal-leadership training, Obama supported ACORN. And ACORN, far more than we’ve recognized up to now, had a major role in precipitating the subprime crisis.

I’ve already told the story of Obama’s close ties to ACORN leader Madeline Talbott, who personally led Chicago ACORN’s campaign to intimidate banks into making high-risk loans to low-credit customers. Using provisions of a 1977 law called the Community Reinvestment Act (CRA), Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards — and to fill ACORN’s coffers to finance “counseling” operations like the one touted in that Sun-Times article. This much we’ve known. Yet these local, CRA-based pressure-campaigns fit into a broader, more disturbing, and still under-appreciated national picture. Far more than we’ve recognized, ACORN’s local, CRA-enabled pressure tactics served to entangle the financial system as a whole in the subprime mess. ACORN was no side-show. On the contrary, using CRA and ties to sympathetic congressional Democrats, ACORN succeeded in drawing Fannie Mae and Freddie Mac into the very policies that led to the current disaster.

The above article gives a good timeline of the social engineering programs that led us into this mess.

1977 -- Community Reinvestment Act (CRA)-- Passed by Jimmy Carter, calls on banks to increase lending to poor and minority neighborhoods. This legislation is used by ACORN to intimidate banks into providing subprime loans through a two pronged approach. One, they were able to file CRA complaints to block bank mergers and expansions. Two, they directly intimidated bank employees and executives in what they euphemistically term "direct action." The article describes it:

ACORN protesters will break into private offices, show up at a banker’s home to intimidate his family, or pour protesters into bank lobbies to scare away customers, all in an effort to force a lowering of credit standards for poor and minority customers.

1989 -- Savings and Loan Bailout -- included provisions requiring lenders to compile and make public statistics on race, gender, and income of mortgage applicants. The miracle of statistics provided groups like ACORN even more ammo for their bank intimidation tactics.

1989 - 1991 -- Fannie Mae and Freddie Mac -- Until the early 90's local banks were able to fall back on Fannie Mae and Freddie Mac to avoid making risky loans. Smaller banks could FMae and Fmac's refusals to purchase risky debt as political cover against ACORN's tactics.

1991 -- ACORN representatives testify before congress claiming loan bias and racism, and Democratic Congressmen pressure Fannie and Freddie to loosen lending practices

1992 & 1993 -- $3.5 billion committed by Fannie and Freddie to low income housing; $10 billion "affordable housing loan program" announced by Fannie. ACORN continues to complain of racism and strong arm smaller banks using CRA. Eventually, local banks join the chorus to pressure Fannie and Freddie to loosen lending standards to escape pressure from ACORN and allies.

1993 - 2002 -- Obama serves on the board of directors of the Woods Fund of Chicago. ACORN recieved the following grants from the woods fund under Obama's tenure: $45,000 (2000), $30,000 (2001), $45,000 (2001), $30,000 (2002), and $40,000 (2002). [ http://pajamasmedia.com/blog/obama-and-the-woods-fund/2/ ]

1993 -- Billy Jeff becomes prez, woo hoo, good times. ACORN reps get monthly meetings with Clinton Housing Secretary Cisneros.

1995 -- Clinton announces the "National Homeownership Strategy" a series of regulatory changes which simultaneously forces Fannie and Freddie to lower standards for potential buyers while making it harder for banks to get a favorable (i.e. non-racist) CRA rating. [More reading on Clinton's Nat. Home ownership Strategy: How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable ]

Up until this point subprime loans represented a trickle, but Clinton's home ownership initiatives opened the subprime flood gates and were certainly a "success." They certainly opened up "home occupation" (can it really be called ownership if they have no hope of ever paying off the mortgage?) to huge segments of the population through risky lending practices. A relevant snippet from the IBD article gives a good example:

Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big way.

Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks.

Since they could borrow at lower rates than banks due to implicit government guarantees for their debt, the government-sponsored enterprises boomed.

With incentives in place, banks poured billions of dollars of loans into poor communities, often "no doc" and "no income" loans that required no money down and no verification of income.

By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market — a staggering exposure.

Worse still was the cronyism.

Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a roughly 2-to-1 dominance of Democrats over Republicans.

Subprime lending and low-income housing schemes also provided a nifty way to funnel tax dollars into Democratic dominated voting blocks.

The Bush administration and the Republican controlled Congress are guilty of the sin of inaction. They could have put the breaks on Freddie, Fannie, and the ensuing housing bubble, but despite a few week attempts, they failed to do so. But then, who wants to get called racist. The voters are to blame, as well, everyone was happy as long as their home values increased at rates drastically above inflation.

It is said the devil's greatest trick is convincing man he doesn't exist. It seems that Socialism's greatest trick is convincing the American electorate that a disastrous experiments in wealth redistribution are somehow the result of Capitalist markets run amok. Meanwhile, Obama seems poised to pull off the biggest trick of all -- convincing the electorate that he had absolutely nothing to do with it and that more wealth redistribution, i.e. "Tax Fairness," is the solution.

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