Left Activists Force Bad Loans
by George Nesterczuk
Issue 117 - October 8, 2008

Probably the dominant source of the current financial debacle is not some market failure as alleged by many on both left and right but by lending practices targeting the “disadvantaged” instituted by the Carter Administration through the Community Reinvestment Act (CRA) of 1977 and toughened up on implementation by the Clinton Administration.

An article in City Journal ( http://www.city-journal.org/html/10_1_the_trillion_dollar.html) about the "complaint" mechanism put in place by Clinton, explains why banks would rather make stupid loans to "minorities" than risking endless, losing litigation

There is no more important player in the CRA-inspired mortgage industry than the Boston-based Neighborhood Assistance Corporation of America. Chief executive Bruce Marks has set out to become the Wal-Mart of home mortgages for lower-income households. Using churches and radio advertising to reach borrowers, he has made NACA a brand name nationwide, with offices in 21 states, and he plans to double that number within a year. With "delegated underwriting authority" from the banks, NACA itself (not the banks) determines whether a mortgage applicant is qualified, and it closes sales right in its own offices. It expects to close 5,000 mortgages next year, earning a $2,000 origination fee on each. Its annual budget exceeds $10 million.

Marks, a Scarsdale native, NYU MBA, and former Federal Reserve employee, unabashedly calls himself a "bank terrorist" (his public relations spokesman laughingly refers to him as "the shark, the predator," and the NACA newspaper is named the Avenger). They're not kidding: bankers so fear the tactically brilliant Marks for his ability to disrupt annual meetings and even target bank executives' homes that they often call him to make deals before they announce any plans that will put them in CRA's crosshairs. A $3 billion loan commitment by Nationsbank, for instance, well in advance of its announced merger with Bank of America, "was a preventive strike," says one NACA spokesman.

Marks is unhesitatingly candid about his intent to use NACA to promote an activist, left-wing political agenda. NACA loan applicants must attend a workshop that celebrates (to the accompaniment of gospel music) the protests that have helped the group win its bank lending agreements. If applicants do buy a home through NACA, they must pledge to assist the organization in five "actions" annually, anything from making phone calls to full-scale "mobilizations" against target banks, "mau-mauing" them, as sixties' radicals used to call it. "NACA believes in aggressive grassroots advocacy," says its Homebuyer's Workbook.

The Clinton Plan to use the private sector to underwrite a monstrously expensive and incredibly ill-conceived social engineering program was very clever indeed. One key player was Franklin Raines, who went from OMB Director under Bill Clinton (1997) to Chairman of Fannie Mae in 1999. While at OMB he participated in the financial bailout of the District of Columbia that left the taxpayer with billions of dollars of additional expenses and liabilities. He raided the DC Retirement System of all its assets (cash, stocks, bonds and real estate holdings) valued at $3.8 B and converted it to the unfunded system enjoyed by all federal employees today. The retirement money was used to fund a number of pet projects that the Clintons could not find money for in the Federal budget including the “100,000 new teachers initiative” that never got traction anyway. I was at the House Civil Service Subcommittee at the time and we were directly involved in trying to block (unsuccessfully) the pension raid.

Franklin Raines played a key role in growing the current subprime mortgage problem during his tenure at Fannie Mae and is not in jail today because he was willing to pony up $25M in fines when he was fired from Fannie Mae in the midst of a multi-billion dollar accounting scandal. His Robin Hood ways finally caught up with him. One can only imagine where Hillary would have taken us had she prevailed in her quest for the White House.

Barak Obama however is no piker in this arena either. The organization he worked for as a “community organizer” is ACORN. ACORN has been in the middle of promoting and implementing CRA from the beginning. I suspect that one of the “organizer” responsibilities was to make sure his communities were aware of their rights under CRA.

George Nesterczuk was chief staffer at the House Civil Service Subcommittee.