How Do-gooders create disasters

ACORN (The association of Community Organizations for Reform now) was the largest community organization in the United States. ACORN was notorious for fraudulent voter registrations. It used ‘in-your-face’ protest tactics, and it helped precipitate the banking crisis of 2008. That crisis cost millions of jobs and hurt the people all over the world. (see https://www.pewtrusts.org/en/research-and-analysis/reports/2010/04/28/the-impact-of-the-september-2008-economic-collapse).
So how did an organization which was supposed to help the little guy cause so much damage? Skeptics argue that the Community Reinvestment Act (CRA) which ACORN used to force banks into making high-risk loans to low-credit customers, could have influenced at most only about a quarter of the loans at the base of the financial meltdown. What critics miss is that ACORN used a combination of local protest actions and national lobbying to spread subprime lending far beyond the confines of CRA-controlled banks.

For instance, there is this quote from Stanley Kurtz’s book “Radical in Chief”.

“However much pressure ACORN put on banks to lower credit standards, tough requirements in the “secondary market,” run by quasi-federal housing agencies Fannie Mae and Freddie Mac, served as a barrier to change. Fannie Mae and Freddie Mac buy up mortgages en masse, bundle them, and sell them to investors on the world market. Back then, Fannie and Freddie refused to buy loans that failed to meet high credit standards. If, for example, a local bank buckled to ACORN pressure and agreed to offer poor or minority applicants a 5 percent down-payment rate, instead of the normal 10 to 20 percent, Fannie and Freddie would refuse to buy up those mortgages. That would leave all the risk of these shaky loans with the local bank.”

So the local bank would tell Acorn that they could only lower credit standards by a little.

In response ACORN had its friends in Congress introduce bills compelling Fannie Mae and Freddie Mac to support subprime lending. Acorn won this showdown. Now quotas for low-income loans were imposed on Fannie and Freddie.

When Bill Clinton became president of the United States, ACORN found friends in the new government. ACORN had captured Fannie and Freddie, but now it wanted to rope in the insurance companies. ACORN people met with Bill Clinton and explained what they wanted to do. Clinton was enthusiastic, and said that while he probably couldn’t get a bill to ACORN’s liking through Congress, he would use the “executive power of the president” to achieve their goals.

The story is more involved than the above, and anyone interested on how socialist organizations get funds from the government should read the chapter on ACORN in Kurtz’s book. The irony is that the problems that ACORN contributed to did not come to a head in the Clinton administration, but during the presidency of a Republican president, George W Bush, who subsequently was replaced by Barack Obama, a Democrat who tried to minimize his ties with ACORN. Kurtz documents that Obama had more ties to that organization than he was willing to admit. Nancy Pelosi, currently speaker of the house and a Democrat, voted for ACORN sponsored provisions. And yet, we are heading in the same direction:

The basic problems of Fannie and Freddie have not been solved as of 2021, and a Biden administration is unlikely to address them – quite the contrary, says Charles Gasperino in a column in the New York Post.

There were various reasons for the 2008 financial crisis. Various steps in the loan making process were carried by people who had no skin in the game – the risk of the loan could be passed like a hot potato from one link in the chain of loans to the next. But the ultimate buyers probably had little idea that loan standards had been so weakened and that they were buying a package of loans some of which were worthless.

It was in the name of equity and justice and anti-racism that the low-standard loans that contributed to the disaster of 2008 were made. Supposedly these are pure motives, but Kurtz notes a role of Peter Dreier (an influential advisor to ACORN’s banking campaign) in all this. Dreier, who I mentioned in a previous post, wanted to overload American Capitalism with entitlements until it collapsed and Socialism replaced it. Perhaps there was method in ACORN’s madness.

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