Fed-ACORN Criminality

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ACORN (Association of Community Organizations for Reform Now) is once again in the news, with some of its "tax counselors" being videotaped giving advice on tax evasion to two people posing as a pimp and a hooker and looking for a government-subsidized loan for a brothel. The two imposters also told the ACORN "counselors" that they intended to bring dozens of teenage girls into the country illegally from Central America to "work" in the brothel. On the videotape the counselors happily advised them on how to go about doing this without the legal authorities finding out about it. They seemed quite knowledgeable and experienced in such matters.

The organization is also being investigated by government authorities for allegedly perpetrating vote fraud, among other possible crimes. (Recall that ACORN is the organization that Barack Obama attached himself to after earning his Harvard law degree. During the presidential campaign his main claim to having the experience that would qualify him to be president was his "community organizing" experience while working for ACORN).

ACORN may be found guilty of the relatively petty crimes it is now being accused of, but there is a much larger issue that is being ignored. Over the past thirty years or so, ACORN has been a major player in what can be described as a legalized extortion racket administered by the Federal Reserve and the Comptroller of the Currency, among other federal government agencies. The racket started with Jimmy Carter’s 1977 Community Reinvestment Act (CRA), which empowered "community groups" like ACORN to effectively extort billions (yes, billions with a "b") of dollars from banks. Much of the money is then used for ACORN’s political activities, which involve the mass registration of Democratic Party voters; supporting left-wing political candidates at all levels of government; organizing rallies, protests, and lobbying efforts for various planks of its "People’s Platform," which is essentially the same as the Socialist Party Platform of 1922. The "People’s Platform" once promised, "We will continue our fight until the American way is just one way, until we have shared the wealth . . ." Accordingly, the organization has advocated the government takeover of the energy and healthcare industries, punishing taxation, massive income redistribution, pervasive price controls, and just about every asinine socialistic policy that one can think of.

The Federal Reserve Board has been ACORN’s "partner" in this endeavor ever since 1977, when the Fed was given responsibility (along with the Comptroller of the Currency) for enforcing the CRA. For those who are not yet familiar with the CRA, which was significantly strengthened during the Clinton administration, it works like this: The ostensible purpose of the Act is to get banks to make more mortgage loans in "minority and low-income" neighborhoods. These loans have been defined by the government as "sub-prime" loans, implying that the borrowers have credit ratings just a tiny, tiny smidgen below the "prime" or highest-credit-rating borrowers. This of course is a farce, as nearly everyone now knows. The Fed keeps track of such loans, and gives each lender a CRA ranking. A poor ranking can destroy a bank’s plans for branch expansions, mergers, and other activities.

So-called "community groups" like ACORN, which is one of the biggest, are empowered by the law to "protest" proposed bank expansions or mergers. This is the main "business" that ACORN has been in for the past thirty years. They file a protest with the Fed, while demanding that the bank that is proposing the expansion or merger give it — ACORN — millions or sometimes billions of dollars, to be lent to sub-prime borrowers by ACORN, which keeps for itself some of the loot. (WaMu bank, which is now defunct, once boasted of having made $375 billion in CRA loans; the Fed gave Countrywide Bank an award after it made $600 billion in such loans. It, too, was bankrupted by the loans.)

The CRA itself is based on a falsehood — that banks will systematically walk away from billions of dollars in profits that are just waiting to be picked up by someone in low-income and minority-dominated neighborhoods. This argument is made by the same ACORN-style socialists (like Barack Obama) who argue that bankers are greedy, money-grubbing capitalist pigs. In reality, business people do not have to be forced by the Fed to make money. The fact that force or the threat of force is used by the Fed and its ACORN allies is proof that the loans that are being made are bad loans to unqualified borrowers. During the Fed-induced housing bubble, thousands of CRA sub-prime loans for $300,000—$400,000 houses were made to high school dropouts on welfare or in jobs paying barely more than minimum wage. The Fed — and many other agencies of the federal government — was essentially telling these low-income and minority borrowers the following: "Yes, traditionally, people who own homes do so by working at a job, sticking with it, saving their money, and avoiding excessively extravagant spending on cars, vacations, etc., until they can afford a home. Forget about that! The hell with financial responsibility! We will fix things for you so that you can be fiscally irresponsible and get a home. And the housing bubble inflation we have created will even potentially make you rich! This way, we will share the wealth! Just like the ACORN People’s Platform says!"

When Forbes magazine columnists Peter Brimelow and Leslie Spencer interrogated Boston Fed official Alicia Munnell about the Fed’s claims of systemic lending discrimination in the early 1990s, Munnell was forced to admit that she had no evidence of it. She and other Fed officials (and the Clinton administration) continued to step up CRA enforcement anyway. This suggests that the goal has always been a forced redistribution of wealth through Fed banking regulation. Charges of systemic discrimination have been used as a ruse to intimidate any un-cooperating mortgage lenders (Not that stupid and self-destructive bankers who discriminate on the basis of race do not exist.)

In order to avoid having their business plans voided by the Fed, or being prosecuted for housing discrimination, mortgage lenders are forced to participate in what is essentially a legalized extortion racket. But then again, what is government but just another criminal gang? (As Murray Rothbard used to say.)

Thomas J. DiLorenzo [send him mail] is professor of economics at Loyola College in Maryland and the author of The Real Lincoln; Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe and How Capitalism Saved America. His latest book is Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution — And What It Means for America Today.

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