Barack H. Obama, Esq.’s Role in the Financial Crisis

This is from 2008, but not discussed very much before the election. It should probably be discussed now as we head into the election year and the politicians start to play the blame game

Barack H. Obama, Esq.’s Role in the Financial Crisis – Buycks-Roberson v. Citibank Federal Sav. Bank

October 10, 2008

Alright, to recap, the Community Reinvestment Act (CRA 1977) gave an opening for subprime lending. The CRA encouraged banks to lend money to high risk borrowers with the noble notion that it would enable more Americans to be homeowners. Unfortunately, it was undefined for a very long time and that gave community organizing groups such as ACORN to push the boundaries of the law and engage in coercive methods* of forcing banks to loan to high risk borrowers. They would threaten to block mergers and expansions of banks unless the banks would dole out these risky loans. In addition, numerous suits were brought against banks alleging that the banks engaged in discriminatory lending phasing out African Americans from loans in an attempt to bully banks into doling out high risk loans.

One such suit was Buycks-Roberson v. Citibank Federal Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995). This case is most notable for one of the members of counsel representing Selma Buycks-Roberson, Calvin R. Roberson and Rene Brooks. That attorney was a young lawyer named BARACK H. OBAMA.

According to the record, the plaintiffs, all African-Americans sued Citibank for seeking redress for alleged racial discrimination with regard to loan applications.
Ms. Buycks Roberson had applied for a loan to refinance her existing mortgage but was denied because her income did not support the amount of credit requested.
Obama and friends presented evidence noting that Citibank denied refinancing “to only 19% of upper-income applicants living in areas with less than 10% minority population,” while Citibank denied loans to 49& of ALL applicants living in areas of 80-100% minority population. BHO and friends also asserted that 780 minority applications were denied by Citibank in between 1992 and 1993.
Citibank asserted that their underwriting procedure was race-neutral, however the court certified the class regardless.
As a result of the court’s analysis, the court certified a class of “all African-Americans who filed applications for home loans to Citibank on or after July 6, 1992, and whose applications were rejected because they were African-American and/or the racial composition of the neighborhood in which their properties were located were African-American.

While it is very somewhat possible that these loans were denied because of a racial impetus, it is much more likely that the loans were denied because of the stated reason – the individuals’ incomes were insufficient to cover to cover the loans in light of their credit history. In addition, it would be improper for a bank to invest in a loan where the borrowers would be unlikely to pay the loan back and, if they defaulted, the value of the home would not equal the value of the loan.

Barack H. Obama, Esq.’s Role in the Financial Crisis – Buycks-Roberson v. Citibank Federal Sav. Bank « Trust, But Verify

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The Sordid History of ACORN and the Ties to the Financial Meltdown

October 7, 2008

Stanley Kurtz has a great article detailing the history of ACORN and its ties to the financial meltdown. Here is the Cliffs Notes version of his work

ACORN intimidated banks into making high-risk loans to low-credit customers using provisions of the 1977 Community Reinvestment Act (CRA). Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards and to obtain “counseling” compensation.
Heidi Swarts, a strong supporter of ACORN and author of Organizing Urban America, notes that ACORN members think of themselves as “militants unafraid to confront the powers that be” and ACORN protesters break into private offices, show up at a banker’s home to intimidate his family, or pour protesters into bank lobbies to scare away customers, all in an effort to force a lowering of credit standards for poor and minority customers.
The 1977 Community Reinvestment Act forced banks to increase lending in poor and minority neighborhoods, but its exact requirements were vague and open to interpretation. Bank mergers or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaintsand intimidated representatives of banks.
A provision of the 1989 savings and loan bailout pushed by Democratic legislators, like Joseph P. Kennedy, required lenders to compile public records of mortgage applicants by race, gender, and income. The statistics produced by these studies were presented in highly misleading ways and groups like ACORN were able to use them to embarrass banks into lowering credit standards.
IN 1991, House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae.
A mere month later, ACORN Housing Corporation president, George Butts made news by complaining to a House Banking subcommittee that ACORN’s efforts to pressure banks using CRA were still being hamstrung by Fannie and Freddie. Butts also demanded still more data on the race, gender, and income of loan applicants. Many news reports over the ensuing months point to ACORN as the key source of pressure on congress for a further reduction of credit standards at Fannie Mae and Freddie Mac. As a result of this pressure, ACORN was eventually permitted to redraft many of Fannie Mae and Freddie Mac’s loan guideline.
In the Clinton administration, Clinton Housing Secretary Henry Cisnersos pledged to meet monthly with ACORN representatives.
At this point, both ACORN and the Clinton administration were working together to impose large numerical targets or “set asides” (really a sort of poor and minority loan quota system) on Fannie and Freddie. ACORN called for at least half of Fannie and Freddie loans to go to low-income customers. At first the Clinton administration offered a set-aside of 30 percent.
In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to about half of Fannie Mae’s business by the end of the decade.
In June of 1995, President Clinton, Vice President Gore, and Secretary Cisneros announced the administration’s comprehensive new strategy for raising home-ownership in America to an all-time high. Representatives from ACORN were guests of honor at the ceremony. In his remarks, Clinton emphasized that: “Out homeownership strategy will not cost the taxpayers one extra cent. It will not require legislation.” Clinton meant that informal partnerships between Fannie and Freddie and groups like ACORN would make mortgages available to customers “who have historically been excluded from homeownership.”
At both the local and national levels, then, ACORN served as the critical catalyst, levering pressure created by the Community Reinvestment Act and pull with Democratic politicians to force Fannie Mae and Freddie Mac into a pattern of high-risk loans.

In addition to Stanley Kurtz’s work, Michelle Malkin has more on this on her site.
The Sordid History of ACORN and the Ties to the Financial Meltdown « Trust, But Verify