When the history of the Great Economic Meltdown of 2008 is
written, in-your-face shakedown groups like the Greenlining
Institute will be held to account.
Greenlining, headquartered in Berkeley, California (where
else?), is a left-wing pressure group that threatens nasty public
relations campaigns against lenders that refuse to kneel before its
radical economic agenda. Its principal goal is to push politicians
and the business community to facilitate “community reinvestment”
in low-income and minority neighborhoods.
The Greenlining name is a play on the unlawful practice of
“redlining.” That’s when financial institutions designate areas,
typically those with a high concentration of racial minorities, as
bad risks for home and commercial loans. The Institute wants banks
to give a green light to loans in these areas instead.
Recently profiled by John Gizzi, Greenlining uses carrot-and-stick tactics
to blackmail public agencies, banks, and philanthropists to achieve
its objectives. The Institute brags it has threatened banks into
making more than $2.4 trillion in loans in low-income
communities.
Was this a good idea?
Not according to University of Texas economist Stanley
Liebowitz. He wrote that the current mortgage market debacle
is “a direct result of an intentional loosening of underwriting
standards — done in the name of ending discrimination, despite
warnings that it could lead to wide-scale defaults.”
Liebowitz isn’t alone is pointing out that U.S. financial
markets are now being asphyxiated by a terrible credit crunch that
might have been avoided if lenders had refrained from doling out
loans they ought to have known were doomed to default.
Activist groups were encouraged to agitate by the Carter-era
Community Reinvestment Act, which enshrined in law a kind of
lending protection racket. Banking regulators were given the power
to make trouble for banks that failed to lend enough money to
so-called underserved communities. Banks that paid enough —
whatever that means — got left alone, but banks that didn’t, got
their legs broken.
How much money is enough to satisfy the law? Even the Federal
Reserve Board can’t say for sure. From the Fed’s online summary of the Act:
The CRA requires that each depository institution’s
record in helping meet the credit needs of its entire community be
evaluated periodically. That record is taken into account in
considering an institution’s application for deposit facilities.
Neither the CRA nor its implementing regulation gives specific
criteria for rating the performance of depository institutions.
Rather, the law indicates that the evaluation process should
accommodate an institution’s individual circumstances.
One can almost imagine a CRA commissar saying, “It’d be a real
shame if something happened to that nice bank of yours.” When in
doubt about potential CRA liability, don’t risk committing a crime
against diversity: make the loan. Or else.
After CRA came into effect, Saul Alinsky-inspired “community
organizer” groups such as Greenlining, ACORN, and National Council
of La Raza got into the shakedown business. They preach the hateful
class-warfare rhetoric of their fellow community organizers
Jeremiah Wright, Jesse Jackson, Al Sharpton, and Michael
Pfleger.
They rage against capitalism and demand crushing taxes and
aggressive wealth-redistribution programs. They demand more
government spending on social programs, a higher minimum wage, and
gun control. Depending which way the economic wind is blowing, they
demand more subprime lending, or curbs on subprime lending, which
through the magic of dysphemism, is linguistically transformed into
“predatory lending.”
La Raza (“The Race,” in Spanish), which has lobbied to
strengthen CRA, performed an amazing sleight of hand last year.
After decades of demanding more loans for racial minorities, the
group performed a dramatic about-face, suddenly warning that lenders, realtors, and investors who
bought up subprime loans could be sued under a federal law that
forbids housing discrimination.
It was the lenders’ responsibility to “match families to the
sustainable loans that they should have gotten in the first place,”
said Janet Murguia, La Raza’s president. Pointing to 2005 data that
show subprime loans with high interest rates comprised more than
50% of all mortgages taken by African-Americans and 40% of Latino
borrowers, compared to 19% of white borrowers, she raised the
specter of racism. Murguia failed to mention that without a
subprime market many members of racial minority groups would have
remained renters, unable to buy a home.
And the Greenlining Institute played rough with Rabobank, an
international Netherlands-based “megabank” (assets: $740 billion)
that was expanding its U.S. operations.
Even though Rabobank had received an “Outstanding” rating in its
most recent CRA performance evaluation by the Federal Reserve Bank
of San Francisco, that wasn’t enough for Greenlining.
The group targeted Rabobank, demanding that it shell out $7.5
billion for loan programs to help farmworkers buy their own farms.
When the bank balked, Greenlining launched a campaign last year
against its proposed acquisition of another bank.
Activists noisily picketed Rabobank until it caved.
“Congratulations to everyone,” “Rabobank is totally afraid of
you,” Greenlining’s top legal dude Robert Gnaizda yelled in
offering congratulations to at demonstrators through a bullhorn.
“Rabobank is totally afraid of you.” Earlier this year, Greenlining
proudly unveiled what it called a “unique agreement” with Rabobank
“to turn San Joaquin farmworkers into farmowners.”
This is the kind of political activism that drove banks to make
irresponsible decisions, and that now threatens to put taxpayers on
the hook for bank bailout packages costing potentially trillions of
dollars.
Even though the left’s pathological preoccupation with economic
egalitarianism never takes a vacation, the left isn’t entirely to
blame for Wall Street’s current troubles.
The Federal Reserve Board encouraged bad behavior by keeping
interest rates artificially low for far too long after the 9/11
attacks. Since money was cheap, bankers went overboard with exotic
mortgage products, and investors kept inflating the housing bubble,
sending home prices into the stratosphere.
But no one can deny the fateful role that these liberal
financial activist groups played in making a bad situation much
worse.
