Editorial: Arresting ACORN's Deadly Touch
“The world is rid of Byron, but the deadly slime of his touch still remains.”—John Constable, letter to Reverend John Fisher (May, 1824)
The 2008 election may have come and gone, but ACORN and its “deadly… touch” remains —much to the detriment of the nation and the ever-precarious housing market. This time, however, the organization's rampant coercion and systematized shakedowns of lending institutions are now flying under the radar and therefore going largely unnoticed by the public.
Until now. Top sources inside the banking industry who spoke on a condition of anonymity have alerted ALG News Bureau that ACORN's controversial practice of strong-arming banks into handing out low-income, high-risk loans is still occurring—although no longer in the public eye. As the law currently stands—thanks to Senator Phil Gramm's CRA-Sunshine Law of 2000—such high-handed, backroom agreements are obligated to be out in the open and on the public record. ACORN has skirted both public criticism and the law by engaging in the activity on an informal, undocumented basis.
And the shakedowns are continuing today. According to the sources, the extortionate agreements between ACORN and banks now take place under the shroud of informality. And being under the table without any written record, this corrupt practice has gone largely unreported.
Here's how it works:
In “The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities,” Howard Husock argues that increased regulation enforcing the Community Reinvestment Act—a 1977 bill designed to increase lending to minorities—In 1995 “made getting a satisfactory CRA rating much harder,” which banks are required to comply with. Banks had a need for those positive ratings, in part, to achieve mergers, amongst other needs from the regulators. Community organizations like ACORN were able to extract billions of dollars from banks so that they could avoid dealing with CRA-related complaints to regulators. Under the new 1995 regulations, formal agreements would be published between the banks and community organizations illustrating CRA compliance.
The housing crisis on a macro scale is largely owed to the accommodation of the Federal Reserve by keeping low interest rates in efforts to incentivize home purchases, home building, and thus spur economic growth. This led to steep increases in prices, which when securitized and then insured to cover losses, when those losses came, triggered a domino backlash to the insurers, like AIG, and to the securities-holders as the waves of foreclosure came. Now worthless securities sit to this day on balance sheets with institutions unwilling to acknowledge losses, and the government
But, the fact that ACORN continues to pressure banks into handing out these irresponsible loans carries enormous implications. Simply put: it perpetuates the same loose lending problems that got the nation into its current economic mess. Only now, it's next to impossible to trace.
The Acorn Housing Corporation (AHC) has been one of the principal backers of the irresponsible loose-lending policies such as the Community Reinvestment Act (CRA), which strong-armed banks into handing out high-risk loans to low-income recipients.
Loose lending and easy money, of course, was the principal catalyst in the mortgage meltdown crisis last year—which in turn triggered the current economic downturn in which the nation now finds itself.
ACORN's role in that crisis was to weaken credit that much more.
If ACORN's corrupt activities are not reined in and the culture of reckless lending not put to rest for good, these economically obtuse practices will continue to wreak havoc on the housing market and the economy as a whole.
Additionally, since practices such as these are now occurring under the table and on an informal basis, there will be no legal record or clarity regarding ACORN's extralegal extortionism of such banks. The on-the-record evidence of ACORN's shakedowns, forced weakened credit standards, and defaulted mortgages will be nonexistent. As Mr. Husock writes, “This amateur delivery system for investment capital… shows signs that it may be going about its business unwisely. And a quiet change in CRA's mission—so that it no longer directs credit only to specific places, as Congress mandated, but also to low- and moderate-income home buyers, wherever they buy their property—greatly extends the area where these groups can cause damage.” That was written in 2000.
As the Consumer Rights League noted in an official report on ACORN, “ACORN's long history of abusing the public's trust seems to have continued through the housing bubble. Its advocacy for loose credit played a role in the current subprime mess. Its advocacy of exotic loans calls into question the wisdom of giving taxpayer money to the organization. And its record of inappropriate ties between a non-profit that receives government funding and a political organization may violate federal laws. Congressional leaders should be wary of donating hard-earned tax dollars to a group with this sordid record. At a minimum, a Congressional investigation is warranted.” To say the least.
Barack Obama, of course, once represented ACORN as one of its lawyers and taught its "community organizing" techniques. So, it is highly unlikely that his administration will launch any sort of investigation into ACORN. It is vital, therefore, that those in Congress and across the country investigate the errant organization's ongoing, informal extortionism now taking place and put this housing market malfeasance to rest once and for all. And then, at last, the world may be rid of ACORN, and its deadly touch.