According to Real Clear Markets yesterday, as Congress defunds ACORN (Association of Community Organizers for Reform Now) in one bill, they are strenghtening the framework that allowed the group to grow in another part of Congress.
The Community Reinvestment Act (CRA) of 1977 allowed ACORN to get into the mortgage business. Groups such as ACORN would protest banks, forcing them to make risky loans in low-income areas of the community. As a result of being protested, the banks would contracts these groups to act as mortgage counselors in low-income areas in return for dropping their protests against the banks. The article explains:
"In one particularly lucrative deal, 14 major banks eager to put CRA protests behind them in 1993 signed an agreement to have Acorn administer a $55 million, 11-city lending program. It was precisely such agreements that helped turn Acorn from a network of small local groups into a national player. And Acorn hasn't been alone. A U.S. senate subcommittee once estimated that CRA-related deals between banks and community groups have pumped nearly $10 billion into the nonprofit sector."
Follow the money. Unfortunately Congress does not seem at all interested in stopping this cozy little arrangement. Yesterday, the House Committee on Financial Services under Chairman Barney Frank held hearings on legislation supported by the Obama administration that would bring insurance companies and credit unions under the umbrella of CRA, placing new lending demands on these groups and opening them up to protests and pressure tactics by organizations like Acorn. Congressmen supporting the new legislation feel that giving more power to the CRA will avoid another housing bubble.
The article concludes:
"The effort to save and extend CRA in the face of its role in the mortgage market's massive meltdown is testament to the unique power of this legislation to nourish an entire industry of nonprofits which, like Acorn, have been reliable supporters of politicians like Barney Frank, Maxine Waters and a former community organizer and associate of Acorn by the name of Barack Obama."
Please follow the link (http://www.realclearmarkets.com/articles/2009/09/16/acorns_a_creature_of_the_cra_97409.html) and read the entire article. It is an amazing testimony of how Congress can be totally blind to what is actually happening in our country.
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