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Roots of mortgage crisis

Posted by Richard on September 30, 2008

Ralph Reiland wrote a nice, succinct history of how we got into the current mess. The roots of the current crisis go back to Jimmy Carter's 1977 Community Reinvestment Act, which gave poor people and minorities greater access to mortgage credit by punishing lending institutions that didn't meet "equal credit" guidelines.

In 1995, the Clinton administration greatly accelerated the flood of easy home loans by expanding both the carrots and the sticks.

One of the biggest sticks in the 1995 Treasury regulations involved letting left-wing advocacy groups essentially extort large pools of mortgage money from banks (along with hefty fees for the advocacy groups) in exchange for a satisfactory CRA rating.

The most successful of these radical left-wing groups was ACORN, today better known for its widespread voter registration frauds that have led to indictments in more than a dozen states. In the 90s, ACORN made a vast fortune extorting mountains of mortgage money from banks and parceling it out in the poor and minority communities over which it exercised influence (emphasis added): 

In addition to setting the stage for giving money for mortgage payouts to ACORN and other lending amateurs, CRA authorized those organizations to collect fees from the banks for their "marketing" of loans.

"The Senate Banking Committee has estimated that, as a result of CRA, $9.5 billion so far has gone to pay for services and salaries of the nonprofit groups involved," reported Husock.

There's big money, in short, in "nonprofit" activism — and upward mobility. A guy carries a sign advocating "Change" in front of a bank and the government turns him into a salaried protester, credit analyst and dispenser of mortgage money.

"The changes came as radical 'housing rights' groups led by ACORN lobbied for such loans," reports Investor's Business Daily, regarding the Clinton era. "ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama."

Change you can bank on.

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4 Responses to “Roots of mortgage crisis”

  1. Hathor said

    Lawd. Just blame the poor people.

    You can lead a horse to water…

  2. Jan said

    Thanks for the good summary (this post and previous one).

  3. rgcombs said

    ”Lawd. Just blame the poor people.”

    Read it again more carefully. I didn’t blame poor people. I blamed liberal politicians and radical left-wing groups like ACORN.

    Now, those two groups like to claim that they represent and work on behalf of poor people. But (a) I don’t buy that, and (b) they’re a long way from being poor people.

  4. […] left, which has only demagoguery and accusations, the right has facts to support its view. See also this and especially […]

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