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Wednesday, October 28, 2009

The Story Behind Organizers as Bank Regulators

About three years ago, at a board meeting of ACORN in Louisville, Kentucky, the board had on its agenda, among other things, the issue of branding. Folks were discussing back and forth ways to improve ACORN's brand. It's important to note that at the time of this meeting ACORN was still relatively unknown. Their brand hadn't taken the hit it's since taken. The board was looking for ways to raise its profile.

One idea that came up was the idea of a seal on the door of local and regional banks that would be ACORN's seal of approval that such an individual bank had passed their seal of approval of being a lender that doesn't engage in predatory lending. The best comparison one can make is the Goodhousekeeping seal of approval. In fact, consumer reports and all sorts of other magazines and groups create such independent oversight.

In each case, the power of the approval comes entirely from the reputation of those providing the approval. After all, Good Housekeeping has no actual regulatory power. Instead, their seal carries weight because Good Housekeeping has gained a reputation as an expert in that area. Consumer reports has a similar reputation.

The folks at ACORN felt that they could gain the same type of reputation. After all, they had worked on issues related to predatory lending for years. They are always on the streets working directly with the poor. Furthermore, if ACORN creates the seal on their own, they are the regulator. In fact, it's much more powerful than being a government regulator. Good housekeeping makes the rules themselves for their seal. The same is true of consumer reports. ACORN wanted the same thing.

There's almost nothing in this world more powerful than determining whether or not a lender is a predatory lender. Here's what an article from a North Carolina newspaper said about predatory lending.

There is no specific definition about what exactly predatory lending entails, though most observers believe that the description applies when lenders take advantage of borrowers by charging high interest rates and consider only the value of a borrower’s assets, as opposed to what the borrower can afford to pay.

If you can't define it, then it is whatever you want it to be. If ACORN could position themselves to be the authority on predatory lending and the independent authority that those in the poor communities counted on for guidance on which bank was and wasn't a predatory lender, then that was literally hitting the jackpot.

It was a brilliant idea in theory, but it never quite made its way from theoretical to the real. So, it's an idea that has been in the idea stage ever since. Maxine Waters, the far left liberal from California, is a good friend to ACORN. She's a frequent speaker at conferences and other events they put on. She recently came up with this idea.

During consideration of H.R. 3126, legislation to establish a Consumer Financial Protection Agency (CFPA), Democrats on the House Financial Services Committee voted to pass an amendment offered by Rep. Maxine Waters (D-CA) that will make ACORN eligible to play a role in setting regulations for financial institutions.

The Waters amendment adds to the CFPA Oversight Board 5 representatives from the fields of "consumer protection, fair lending and civil rights, representatives of depository institutions that primarily serve underserved communities, or representatives of communities that have been significantly impacted by higher-priced mortgages" to join Federal banking regulators in advising the Director on the consistency of proposed regulations, and strategies and policies that the Director should undertake to enforce its rules.

There's a few things to consider here. First, the Waters amendment is a total perversion of the idea discussed in Louisville and thus the idea that ACORN has been cultivating since. ACORN never wanted to be a government regulator. That's too constraining. They wanted to be their own regulator. That's freedom and power. So, it's almost certain that there was a miscommunication between the ACORN folks and Waters. Someone at ACORN not only jumped the gun here but the idea was perverted.

Meanwhile, Waters appears to be totally politically tone deaf. First, this bill has no chance of becoming law. She couldn't have brought it up at a worse time. She's decided now, with ACORN in the middle of all this controversy, to bring up a bill that will give ACORN access to government regulatory power. All this does is give her opponents an opportunity to confirm all the worst stereotypes of liberal politicians like her. The right blogs have exploded with this. Now, opponents of Waters have a field day with a bill that has no chance of passing.

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