ACORN vs McCain On Predatory Lending And The Roots Of The Financial Crisis

by: Paul Rosenberg

Sun Oct 19, 2008 at 18:00

But before getting to that, I want to say a word about the failure of the traditional media.  This is an open-and-shut case.  John McCain is lying about ACORN. But the media cannot say that, because of their dangerous, dysfunctional and delusional framework of "ethics" and established practices--their mythos of objectivity and fairness, if you will, which has nothing at all to do with actual objectivity and fairness.  The best way to understand this failure, the best single book on the subject remains Jeremy Iggers slim 1998 classic, Good News, Bad News: Journalism Ethics And The Public Interest. This book takes a unique approach to media analysis/criticism: it examines the media through the lens of moral philosophy, pointing out how the very framework of journalism ethics is actually the central cause of much that is wrong.

Of course, Iggers doesn't imagine or pretend that this faulty ethics came out of nowhere.  It had very clear historical roots, and political/economic causes.  But withing the framework of journalism itself, the code of ethics has been crucial in defining certain things as protypically problematic--such as the fictionalization and.or sensasitonalization of stories that are only trivially false from a socio-political perspective--while saying nothing at all about the collective promotion of mass deceptions, such as the Iraq War.  The attempt to blame ACORN for the financial meltdown--like the preceeding decades-long pufferry of "trickle-down" "free-market" voodoo economics that was the real cause--is simple a matter of "normal" journalistic practice under the ethical guidelines in place, while the stright-forward factual reporting that John McCain is a bald-faced demogogic liar is a terrible no-no, an "editorial opinion" that has to be strictly segregated onto the editorial pages.  The bottom line is simple: the truth cannot be told.  It can only be presented as an opinion to be "balanced" with lies.

In the press statement accompanying releasse of ACORN's report, ACORN President said, in part:

On the heels of recent attempts by the McCain-Palin campaign to shamelessly shift blame for the current financial crisis, ACORN has released a report that examines the facts by looking at the roles of ACORN and Senator McCain in the decade leading up to the current crisis.  

Senator John McCain's recent campaign ad, released October 10, 2008, bizarrely claimed, "ACORN forced banks to issue risky home loans, the same types of loans that caused the financial crisis we're in today."  Nothing could be further from the truth.

The truth is, ACORN has worked successfully to help tens of thousands of working class families get good home loans on fair terms from legitimate banks.  Over a ten-year period, ACORN helped families build an estimated $6 billion of wealth through home ownership, and helped save another $6.2 billion in fees and interest.  At the same time, ACORN has led the fight against predatory lenders.  For more than a decade, ACORN members have advocated for regulations to protect homeowners, and ACORN organizers and volunteers have been working day and night to help victims of the economic meltdown to save their homes from foreclosure.

ACORN has a real record on the economy.  ACORN organized major class action lawsuits against predatory lenders (such as Household Finance Corporation and Wells Financial Corporation), winning millions back for victims.  ACORN campaigned nationwide against predatory lenders like New Century and Ameriquest.  ACORN community leaders met directly with the head of the Federal Reserve and federal regulators and testified before Congress to warn about subprime lending and urge regulation.

In fact, one would be hard pressed to think of any organization that has done as much as ACORN has to fight against predatory lending, working on as many different fronts, locally, nationally and at the state level.  

In the report itself, the executive summary states:

As documented herein, ACORN has a rich and consistent history of identifying predatory lending as a serious threat to borrowers, of warning that massive foreclosures were an inevitable result of widespread predatory practices, and of fighting with every tool at its disposal against those risky and dangerous practices. From working to pass city ordinances and state laws restricting risky lending practices, to protesting and suing lenders, and from lobbying for federal laws and regulations to releasing numerous reports warning of impending crisis, one must conclude that ACORN fought against predatory lending. Though this conclusion may appear self-obvious, it is unfortunately counter to the prevailing narrative in recent reporting in most media outlets.

In contrast, the report continues:

John McCain's history with this issue is more difficult to document, mostly because there is not much history. In a search of mccain.senate.gov, which contains records dating back to 1988, there is not a single mention of predatory or risky practices in lending and only one mention of foreclosure, from a speech this March about earmarks in which he acknowledges that foreclosures are increasing. This level of engagement is far less than one would expect from a Senator representing the state with the third highest foreclosure rate, where one in every 182 households is in foreclosure1. By comparison, a search of acorn.org yields 479 hits about foreclosure and 737 hits about predatory lending. Nor is it the case that Senator McCain's website is just lacking information on his work - a search for "earmark" yields 240 hits.

Well, not exactly, according to my own Google searching.  But by now we all know something about the vagaries of websearching.  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"

So, my own double-checking made ACORN look even better than they claimed, and McCain even worse.

ACORN's report continues:

Although by no means dispositive to the question of the work ACORN and Senator McCain have done on this financial crisis, this website test is indicative of engagement. Aside from a generally harsh view of regulation and support for Phil Gramm's financial services deregulation bill in 1999, Senator McCain's record on this crisis is thin, involving only a handful of votes. In casting blame on ACORN, Senator McCain demonstrated a true misunderstanding of the cause of the financial crisis and in so doing belied the notion that he is qualified to solve it. Indeed, in looking at the totality of their work, the only available conclusion is that ACORN fought with all its might for a decade to prevent this crisis while Senator McCain sat on the sidelines and cheered on the deregulation of the financial services industry that paved the way for the nation's economic collapse.

One can get a pretty dramatic overview of ACORN's efforts compared to McCains from the following two charts of what they've been up to since 1999, taken from the report.  They're half-sized below, but pop up full size if you click on them:

ACORN:

McCain:

I don't have access to LEXIS/NEXIS, but I do have the ProQuest  Newspaper database, and so I went looking to see what I could find there.  For whatever reason searching for "John McCain" turned up no matches, but using his last name without quotes gave better results.  Here's the comparison, with different date scoping:

McCain:

31 documents found for: McCain "predatory lending" 3 documents found for: (McCain "predatory lending") AND PDN(<1/1/2008) 1 document found for: (McCain "predatory lending") AND PDN(<1/1/2002)

ACORN:

255 documents found for: ACORN "predatory lending" 207 documents found for: (ACORN "predatory lending") AND PDN(<1/1/2008) 66 documents found for: (ACORN "predatory lending") AND PDN(<1/1/2002)

As it turns out, 2 of the 3 McCain citations before 2008 were false positives.  The only one referring to John McCain was a New York Times article on the shift of the Senate to Democratic control, due to Senator Jefford's defection from the Republican Party caucus, and his decision to caucus with the Democrats as an independent. Available on the web, the article is"Senate Switch Alters Outlook For Businesses".  John McCain and predatory lending are mentioned in separate passages dealing with different Senate committees.  The paragraph dealing with the Banking Committee and predatory leanding is introduced by a discussion of the bankruptcy bill.  It reads:

One of the Democrats who voted against the bill is Senator Paul S. Sarbanes of Maryland, a liberal who has long supported the requests of consumer groups and who now takes over the banking committee from one of the institution's most conservative Republicans, Senator Phil Gramm of Texas. The focus of the committee is widely expected to shift away from deregulation to issues like curbing predatory lending, increasing the privacy protections of consumers, and beefing up the law that encourages banks to make loans to underserved communities.

The discussion of the Commerce Committee and John McCain begins thus:

At the Commerce Committee, Senator Ernest F. Hollings of South Carolina would take over the chairmanship from Senator John McCain of Arizona. While the two have worked closely together, they differ significantly on many important policies.

Most notably, Mr. Hollings is certain to play a far more aggressive oversight role over the Federal Communications Commission and make it more difficult for Michael K. Powell, the new chairman of that agency, to pursue his deregulatory agenda. Mr. Powell's biggest supporter in Congress has been Senator McCain.

So, while McCain was not directly involved with predatory lending either way, his good buddy and top economic advisor, Phil Gramm was an impediment to doing anything about it.  And that's it in terms of McCain's record as captured on Proquest.

Looking at the earliest entry for ACORN and predatory lending, I found, "Acorn Blasts Number Of Sub-Par Loans Being Made In St. Louis Area One Homebuyer Says She Is Stuck With A 30-Year Mortgage At A 12 Percent Rate", [FIVE STAR LIFT Edition] Fred Faust, Of The Post-Dispatch. St. Louis Post - Dispatch. St. Louis, Mo.: Oct 22, 1999. pg. C.8.  The abstract read:

The community group ACORN blasted what it called "predatory lending" in a report released Thursday, charging that a new type of lender is "stripping the wealth" of lower-income and minority communities by charging excessive interest rates and fees on mortgages.

ACORN said it studied data in St. Louis and more than 20 other cities and found that "a disproportionate number of subprime loans are made to minorities, particularly African-Americans, and to lower- income and minority neighborhoods."

Subprime loans are those that carry a rate that's higher than prime, often much higher. ACORN said a federal report showed that subprime loans as a percentage of all loans increased from 1.4 percent in 1983 to 10.2 percent in 1998.

And here's a snippet from the article itself:

Last year in the St. Louis area, ACORN said, the top 10 subprime lenders made only 7 percent of all refinance and home improvement loans, but they made 30 percent of the loans that were made in census tracts comprised of 80 percent to 100 percent minority residents. They made 27 percent of the loans made in low-income neighborhoods.

Lee Willis of ACORN said, "Banks make the area accessible to predatory lenders by turning down (conventional mortgage) loans." Then subprime lenders charge up to 21 percent interest, he said.

One borrower at the ACORN news conference, Janice Thomas of Madison, Ill., said she's stuck in a 30-year mortgage at 12 percent that was linked by Green Tree Acceptance to a credit card loan that's costing her 16 percent. Bank of America is willing to replace her mortgage with a new one at less than 10 percent, Thomas said, but Green Tree refuses to separate the mortgage from the credit card loan.

I haven't been able to locate that first report, mentioned in the summary above.  But there are some other early reports listed on ACORN's website, in the section "ACORN And The Financial Meltdown", which lists 25 reports--with links--starting with one in 2000 and one in 2001.  Here are the entries describing--and linking to--the first 5 reports, through the end of 2002:

Equity Strippers: The Impact of Subprime Lending in Philadelphia
May 02, 2000

Dorothy Smith bought her home in 1990 through a sweat equity program. In 1998, she needed to stop the bathroom plumbing from leaking into her dining room. IMC's Central Money Mortgage called promising to refinance her loan and give her additional cash to fix her house. He promised a payment lower than her current payment of $250 a month which sounded great to Dorothy. When he came back for her to sign the closing papers, he said there was a little problem so he had to "upgrade" her loan. Her loan payments are now $493 a month, over half of Smith's monthly income of $940 as a teacher's aid. At this point, she felt like this was the only way to get the money for her plumbing. Now she says, "I'm always behind--robbing one bill to pay another." Her money is so tight she works when she's sick. ...

Drained Wealth, Withered Dreams: The Disparate Impact of Predatory Lending in the Twin Cities

October 02, 2001

David and Dorothy have owned a home in North Minneapolis for over 10 years. They received a loan solicitation in the mail for $5,000 from Household Finance in the form of a live check. Shortly after they deposited the check, a Household representative called them and said he knew they had some more credit card debt, and that he could loan them some more money to pay off the cards.

A Dream Deferred: Predatory Lending in Colorado

January 16, 2002

Belinda and Kenneth Anderson of Denver have lived in their home for the past six years. They bought the house with a 30-year, 7.0% interest rate mortgage with monthly payments of a little over $1,000. In 1998, they took out a second mortgage with their credit union, which had an interest rate of around 9% and monthly payments of $325. Their home is currently appraised at $225,000.

A Foreclosure Epidemic: The Explosion in Foreclosures from Predatory Lending in Albuquerque

January 30, 2002

During the second half of the 1990's, New Mexico enjoyed with the rest of the country an unusually healthy economy. Strangely, during this same period, from 1996 to 2000, Bernalillo County saw a more than three-fold increase in foreclosure filings. This sudden epidemic in foreclosures was the result of another trend seen around the country: the rise in predatory lending. Nationwide, the growth of the subprime lending industry in this period was tremendous, increasing its number of loans made by almost 900% between 1993 and 1999.

Separate and Unequal 2002: Predatory Lending in America

November 27, 2002

Jonathan and Darlene and their two children had lived in their home since 1995, which had risen in value since then; Jonathan works as a carman for the railroad. They had bought the house with a 7% interest rate mortgage and later took out a 12% second mortgage. After another few years, they started receiving phone calls and solicitations in the mail from Beneficial, a part of Household Finance. In August 2001, Beneficial pressured them to consolidate debts into a third lien for $23,000 at a 21.9% interest rate. The mailings and phone calls kept coming, and three months later Beneficial convinced them to consolidate their three mortgages and pay off some other debts.

Clearly, ACORN has been working on this issue for a long, long time, and they've done a lot of work on it.  It doesn't take that much work for a diligent reporter to take a look at a few of these early reports, see what ACORN was documenting and what it was saying at the time, in contrast to what John McCain was saying about them.  The picture that ACORN was painting of the problem is eerily prescient.  The executive summary of the very first report included the following:

Findings include:

• Increased lending in the Kingsessing Neighborhood was accomplished primarily by subprime lenders. While all lending increased 400% from 1992 to 1998 in this neighborhood, conventional lending increased only 61% compared to a subprime lending increase of 4800%.
  
• In Kingsessing, subprime loans grew from only 5.3% of all loans originated in 1992 to 63% of all loans originated in 1998.
  
• Foreclosures have increased 93% since 1990 in this community. Of the foreclosures for which it was possible to identify the original lender, 79% were non-bank lenders.1

.... Notes

1. Many of these non-bank lenders are on HUD's list of subprime lenders. Many other non-bank lenders fail to report mortgage data, even when they are required to do so, and as a result, are not on HUD's list.

Thus, quite clearly, ACORN had identified the early warnings of the current crisis within the first year of its invovlement in dealing with predatory lending in the mortgage market.  A 93% increase in foreclosures from 1990 to 2000 in the community studied.  If a powerful Republican senator like John McCain had been paying attention, and wanted to do something at the time, there's a good chance that at least some of terrible price that's being paid today could have been avoided.  But John McCain was too busy working hard to increase deregulation of just about everything he could get his hands on.  And now he's trying to blame ACORN, one of the few groups out there that was paying attention back in 1999 and 2000, for his own dereliction of duty to the American people.

By attacking ACORN for his own failure of leadership, McCain has only increased his dishonor.  He is nothing but a bald-faced liar, and the traditional media is aiding and abetting him by failing to say so simply and forcefully.