Another Round of CRA/ACORN/Obama Smears Illustrates Nature Of Conservative Worldview, Epistemology

by: Paul Rosenberg

Sun Oct 18, 2009 at 14:00

Appearing on Hannity to promote his latest book, America for Sale, author Jerome Corsi purported to explain the causes of the mortgage bubble by advancing a litany of falsehoods and misinformation: repeating the myth that the Community Reinvestment Act was responsible for the bubble; claiming that President Obama was tied to the housing bubble through conservative bogeyman ACORN; and falsely suggesting that Obama lowered interest rates to "zero or close to zero." Corsi has previously written falsehood-laden books about Obama and Sen. John Kerry, has claimed that Obama posted online a "false, fake birth certificate," and has a history of controversial comments about Islam, Catholicism, progressives, and other matters.

What's wrong with this?  Superficially, it's easy: the CRA was not responsible for the housing bubble-rather it was non-CRA, non-bank institutions that lead the way, ACORN fought against irresponsible lending practices, both with respect to CRA- and non-CRA-based lending, and Obama's limited tangential connections with ACORN had nothing to do with ACORN's low-income-housing advocacy.  These basic points have already been well established long ago--at least for those of us who have been paying attention.  But to understand why this sort of constellation of lies recurs again and again, regardless of previous refutations, we need a framework of understanding at a higher of abstraction, taking note of how conservative ideology, narratives and fundamental cognitive practice commonly function. At the highest level, I suggest we need to understand five things:

(1) Conservative ideology characteristically generates narratives of blame directed at low-status outgroups, holding them responsible for all of society's ills. (Blacks, Jews, immigrants, gays, etc.)  So naturally, it will blame the sorts of people ACORN is working to help.

(2) Conservative narratives routinely impute selfish motives and conspiratorial methods reflecting their own disowned common practices (or those of their elite heroes) to liberal shadow elites working in cahoots with low-status outgroups.  This would be anyone who works with ACORN--even a lawyer representing them on a single case, such as Barack Obama.

(3) Conservative narratives routinely deny systemic explanations ( Kegan Levels 4 &5) for social ills, affirming the just order of the world-at least when run by conservatives (Kegan Level 3)-and blaming ills on the disordering of that world, particularly elevating the status of "undesireables" (those whose enduring dispositions at Kegan Level 2 mark them as essentially evil or at lest inferior).

(4) Causation is associational--Shawn Rosenberg's "sequential reasoning"--things follow an identified pattern, the pattern is the explanation, rather than "linear" (one cause->one effect) or systematic (multiple causes and effects, including potentially circular causality).  Such "reasoning" is immune to logical, empirical or rational refutation, since it has no consistent foundations, but only, at best, the outward appearance of them.  Furthermore, the patterns are mutable, and can be changed at the drop of a hat.

(5) The deep background of such "reasoning" includes a combination of the "Bullshit Epistemoloy" (that there is no objective truth, the only truth is fidelity to one's "true self"), and collective narcissism which implicitly celebrates conservative identity.  This combination reinforces and synergizes with the characteristic of associational reasoning to fundamentally resist any possibility of logical, empirical or rational refutation.

Superficially, it's easy: the CRA was not responsible for the housing bubble-rather it was non-CRA, non-bank institutions that lead the way, ACORN fought against irresponsible lending practices, both with respect to CRA- and non-CRA-based lending, and Obama's limited tangential connections with ACORN had nothing to do with ACORN's low-income-housing advocacy.

First, to the issue of refuting CRA's supposed role in creating the housing bubble.   As outlined in my diary "Understanding the Financial Crisis: Hyman Minsky's 'Financial Instability Hypothesis'" Minsky argues that recurrent asset bubbles are inherent feature of capitalism--a systemic explanation that conservatives routinely deny (#3 above). While borrowers who can't cover their interest from income flows (Minsky's "ponzi units") play a key role in the system's ultimate collapse, his theory explains their rise in popularity as a systemic effect of a more fundamental problem inherent in capitalism itself, though not incapable of remedy.  Thus, even if it were true that the CRA were responsible for all the subprime lending, and subprime lending were the only problem in the financial collapse, it would still not be the case that the CRA was the cause of the collapse.  It would merely have been the passive conduit through which the asset bubble process flowed-a conduit that should have had stronger regulations (horrors!) built in to prevent the bubble from further inflating.

And, in fact, that's precisely what happened, according to the available data.  While CRA-governed institutions did engage in some sub-prime lending, their share of the market was significantly smaller than other lightly-regulated institutions.  The following table is from "Addendum to: The Community Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis", showing that CRA-governed institutions made substantially fewer of the dangerous loans in all 15 of the largest metro areas :

[Click to Enlarge in New Window]

The marginalization of this sort of fundamental information is a function of all five of the factors I identified above.

Second, regarding ACORN's record, I wrote something about that a year ago, when the attacks on ACORN on this front began--"ACORN vs McCain On Predatory Lending And The Roots Of The Financial Crisis".  In it, I noted, among other things

My own testing turned up the following:

McCain:

Your search - foreclosure site:mccain.senate.gov - did not match any documents.
Your search - "predatory lending" site:mccain.senate.gov - did not match any documents.

ACORN:

Results 1 - 30 of about 961 from acorn.org for foreclosure
Results 1 - 30 of about 1,470 from acorn.org for "predatory lending"

But let's look more closely now at the conservative narrative here, and how it fits into the pattern I describe above.

Here's a specific portion of the transcript of the show Media Matters was discussing which:

HANNITY: It's controversial, but there's so many areas where I find agreement. There's so much information here. I learned -- for example, I've often talked about the Community Reinvestment Act --

CORSI: Right.

HANNITY: -- of Jimmy Carter, doubled down by Bill Clinton, about Raines and Johnson and how much money they made. You have all that information in there.

CORSI: Yes.

HANNITY: But it is a deeper story than that.

CORSI: Much, because there was fraud. There was an attempt here to use the Community Redevelopment [sic] Act as a way to extort banks into giving loans to people who didn't deserve them -- home loans to people who couldn't afford them.

HANNITY: Right.

CORSI: And this was a strong Democratic initiative that carried through ACORN. In fact, Barack Obama was a lawyer for ACORN, helping ACORN extort banks in the subprime area.

HANNITY: See, I think a lot of people need to understand this -- that there is reason that we have this economic downturn.

CORSI: Right.

So, in short, the claim is that big bad ACORN is using its thuggish superpowers (aided by superlawyer Barack Obama!) to extort who knows how much money from banks to give to poor people who don't deserve the loans.  Now, even before asking if this were true, one might ask if it were even worth considering as a serious charge--in other words, "Why in the world would they (or anyone) do that?  What's in it for them?"

And of course, that's just the point--there is no coherent charge here.  Rather, all the conservatives' own internal incoherence is projected outward onto ACORN.  This is the commonplace conservative pattern--evil in the world is a product of "evil-does", who do evil just because they are evil-doers, and any attempt to understand them in rational terms is an exercise in pure folly, because the only explanation there is is that they are evil-doers.  This is not merely a preposterous sort of attitude to have, it's a deeply dangerous one.  This sort of logic leads to witch-hunts and beyond--taken to the extreme, it's the perfect rationale for genocide: One cannot reason with evil-doers, all one can do is exterminate them.

As Media Matters itself notes, this account is not simply nonsensical, it's demonstrably  false.  Banks initially didn't want to make loans into these communities--which is why the law was needed in the first place--but over time government, banks and community organizations worked together, and developed programs and practices that banks came to appreciate.  In Congressional testimony last year, professor Michael S. Barr, since appointed (and confirmed) Department of Treasury Assistant Secretary for Financial Institutions testified, in part ( "The Community Reinvestment Act: Thirty Years of Accomplishments, But Challenges Remain" February 13, 2008::

CRA Reasonably Addresses Market Failures in Low-Income Communities

At its core, CRA helps to overcome market failures in low-income communities. By fostering competition among banks in serving low-income areas, CRA generates larger volumes of lending from diverse sources, and adds liquidity to the market, decreasing the risk of each bank's loan. Encouraged by the law, banks and thrifts have developed expertise in serving low-income communities, and they have created innovative products that meet the credit needs of working families and low-income areas with manageable risks.

These market innovations have taken several forms. Banks and thrifts have engaged in special marketing programs to targeted communities; experimented with more flexible underwriting and servicing techniques to serve a broader range of households, and funded credit counseling for borrowers. Many larger institutions have developed specialized units that focus on the needs of low- and moderate-income communities. Others have formed partnerships with community-based organizations and community development financial institutions (CDFIs). CDFIs provide local expertise and financial education, and assume portions of risk that banks do not want to bear. Spurred in part by the CRA investment test, banks have invested in CDFIs in record numbers, strengthening their ability to serve low-income markets.

CRA also facilitates coordination among banks to reduce information costs. Because the law requires all insured depositories to lend in their communities, it reduces "free rider" problems. It has spurred the development of multi-bank community development corporations and loan consortia to serve low- and moderate-income communities more effectively. Moreover, banks get CRA consideration for both originating and purchasing loans, creating a trading system. Institutions can also get credit under the CRA investment test for purchasing loan securities. The development of this secondary market has increased liquidity and transparency.

A positive lending cycle thus began in many communities once ignored by mainstream lenders. Under CRA, lenders know that other banks will be making loans to a community, reducing all institutions' liquidity risk, speeding the gathering and dissemination of information, and producing positive information externalities. Increased lending by responsible originators to low-income communities has occurred under CRA and such responsible lending has not led to the kind or extent of excessively risky activity under taken outside of CRA's purview.

Things were not perfect, of course.  And directly contrary to the conservative narrative, ACORN was an early--and ignored--advocate for tighter regulations to ensure that predatory lending practices were curbed, thus increasing the chances that low-income homeowners could make their payments and stay in their homes.  In 2001, for example, an ACORN report, "Drained Wealth, Withered Dreams: The Disparate Impact of Predatory Lending in the Twin Cities", included the following recommendations:

For Lenders

All lenders which engage in subprime lending should pledge adherence to a meaningful "Code of Conduct" that includes: fair pricing; avoidance of abusive and equity stripping loan terms and conditions, such as balloon payments, prepayment penalties, and single premium credit insurance; full and understandable disclosures of loan costs, terms, and conditions; a loan review system that rejects fraudulent or discriminatory loans; making no loans which clearly exceed a borrower's ability to repay; refraining from charging fees which bear no relation to the costs of the services performed; and not refinancing loans where there is no net benefit to the borrower. These lenders should review their loan portfolios and compensate borrowers whose loans clearly violate this code. Additionally, subprime lenders should develop products which allow borrowers with a consistent record of on-time payments to move to lower interest rates.

Lenders which offer prime as well as subprime products should establish uniform pricing and underwriting guidelines for all of their lending subsidiaries, and for all of the communities in which they do business, so that consumers in lower-income and minority communities do not receive worse terms because of where they live or who they are. All "A" lenders should increase their outreach and loan volume in underserved communities for their prime loan products.

For Legislators and Regulators

Congress and state legislatures should hold hearings on and pass strong anti-predatory lending legislation that would protect consumers from abusive practices, which have been especially targeted at lower-income and minority communities. Federal legislation has already been introduced that would strengthen the protections in the Home Ownership Equity Protection Act (HOEPA), extend those protections to more borrowers in high-cost home loans, and establish penalties for violating the law that are more in line with the damage caused to borrowers.

The list of recommendations also included a section for consumers which included specific warnings about financially risky practices, such as "borrowing more than the value of your house" and "loan terms and conditions that may mean higher costs for you" including "High points and fees," "Single premium credit insurance or debt cancellation agreements," "Prepayment Penalty," "Balloon Payments," and "Adjustable Rates," as well as "Debt Consolidation Loans,"  and "Property Flipping Scams."  In short, far from being an incomprehensibly nefarious organization, ACORN was advocating for low-income and minority communities, and advising those who were seeking mortgages on how to avoid getting themselves into financial trouble--just like it said.

And that's the basic problem for conservatives: reality's well-known liberal bias.  The solution is simple: deny reality. Deny! Deny! Deny!  And hence, the Bullshit Epistemology is central to modern-day conservatism.

Third, Media Matters itself provides a very succinct statement of Corsi's attempt to connect Obama directly, and why this attempt is so bogus:

Corsi claims extortion of banks was "carried through ACORN, that Barack Obama was a lawyer for." Discussing the supposed impact of the Community Reinvestment Act, Corsi claimed "[T]his was a strong Democratic initiative that carried through ACORN. In fact, Barack Obama was a lawyer for ACORN, helping ACORN extort banks in the subprime area." [Hannity, 10/13/09]

Obama represented ACORN as an attorney in private practice in one case not related to housing in which the Justice Department was on the same side. As an attorney in private practice, Obama was part of a team representing ACORN in seeking to force the state of Illinois to implement the National Voter Law of 1993, the federal "motor voter" registration law. The LexisNexis version of the June 5, 1995, decision by the 7th U.S. Circuit Court of Appeals in the case Association of Community Organizations for Reform Now (ACORN), et al., v. [then-Illinois Gov.] James R. Edgar et al., affirmed with modifications the lower court's judgment in favor of the plaintiff-appellees including ACORN, the United States (represented by the Justice Department), the League of Women Voters of Illinois, and the League of United Latin American Citizens (LULAC). The 7th Circuit's decision identifies Obama as one of the attorneys representing ACORN.

So, not only was Obama's work for ACORN related to enforcing voter registration law, not housing issues, but it was on the same side of a case as the US Department of Justice!

Again, it's either Bullshit Epistemology, or no epistemology at all.