The American Spectator

The Public Policy

Distrust Fund

By John Berlau on 6.17.08 @ 12:07AM

(Page 2 of 2)

As Wall Street Journal columnist and election fraud expert John Fund reported, "The list of 'voters' registered in Washington state included former House Speaker Dennis Hastert ... actress Katie Holmes and nonexistent people with nonsensical names such as Stormi Bays and Fruto Boy."

And ACORN has also been sanctioned specifically for misuse of federal housing funds. In 1994, the ACORN Housing Corporation (AHC) received a grant from the newly created Americorps to assist low-income families at finding housing. In applying for the grant, the AHC claimed its activities were completely separate from ACORN.

But one year later, the Americorps Inspector General would testify that "AHC used Americorps grant funds to benefit ACORN either directly or indirectly." She found several instances of cost-shifting from ACORN's lobbying group to the housing entity, and also found several instances of the steering of recipients of housing counseling into ACORN memberships.

GIVEN THIS HISTORY of the fungibility of housing grant money, Republicans had so far blocked the creation of the new housing trust fund.

No bill containing the fund had been passed by the Senate, and the White House issued a statement containing a veto threat last fall, citing concerns that the fund would "be susceptible to political influences that could compromise the goals of assisting as many low income families in need as possible."

But just after Senate Banking's ranking Republican Richard Shelby announced he had reached a "compromise" with committee chairman Chris Dodd on the housing fund and other issues, most committee Republicans followed suit. The bill passed the committee 19-2 just before the Memorial Day recess.

Part of the "compromise" that Dodd and Shelby announced was that money from the "trust fund" would be used to fund the bill's main action of bailing out troubled homeowners through FHA guarantees of modified loans. This way, there would be somewhat less direct costs to taxpayers than in Frank's House bill, which relies solely on general tax revenues for the bailout.

But as they were rushing out for recess, perhaps the GOP members didn't notice the many devils in the details of the Senate Banking package.

In addition to unrelated items such as a bizarre requirement for a fingerprint registry for much of the mortgage industry, the bill hardly gave any ground on the trust fund.

Only part of the revenue would go toward the bailout, the rest would continue to go to grants that could find their way to groups like ACORN. And after two years, all of the money would go to the fungible housing grants.

ALTHOUGH FRANK HAS been described as angry about the compromise, it's hard to see why. The Senate committee has already given him about four-fifths of what he has always proposed.

The bill will help start an unaccountable slush fund that could be used for dubious purposes. Advocates have never really explained a policy rationale for having an off-budget entity for housing. At the very least, the "trust fund" proceeds would go to what states and the federal government are already doing.

Frank has lamely cited assistance to renters as a justification. But as the White House noted in its statement last fall, the federal Home Investment Partnerships Program of the Department of Housing and Urban Development already serves this goal, making a trust fund for this purpose "largely redundant."

Forcing Fannie and Freddie to divert money to this fund also threatens the solvency reforms contained in the same Senate banking package. Heritage Foundation economist David John calls it "very worrying" for our elected representatives "to treat the GSEs as a piggy bank that can fund specific projects without going through the normal appropriations process."

Another untrustworthy trust fund we can do without.

Letter to the Editor

topics:
Taxes, Social Security