The Discerning Texan

All that is necessary for evil to triumph, is for good men to do nothing.
-- Edmund Burke
Monday, October 13, 2008

Mortgage Meltdown for Dummies: A picture so clear it should be in High-Def; PLUS More on the Coming Thugocracy/STASI

Today's kudos for post of the day goes to the indefatigable Ethicist Stanley Kurtz, whose brilliant clear expose of the causes and repercussions of the Subprime crisis is the best I have yet seen in the print media; indeed it is so good that it is rivalled only by radio host Mark Levin's audio masterpiece several weeks ago.

It has become obvious to anyone paying attention that it is The New York Post (not the Times) that has become the "go to" paper for anyone in the Big Apple who actually wants exposure to anything resembling the whole truth. And both the Post and Kurtz deserve all the praise they get for "Spreading the Virus"; read this, ponder it, soak it in:

To discover the roots of to day's economic crisis, consider a tale from 1995.

That March, House Speaker Newt Gingrich was scheduled to address a meeting of county commissioners at the Washington Hilton. But, first, some 500 protesters from the Association of Community Organizations for Reform Now (ACORN) poured into the ballroom from both the kitchen and the main entrance.

Hotel staffers who tried to block them were quickly overwhelmed by demonstrators chanting, "Nuke Newt!" and "We want Newt!" Jamming the aisles, carrying bullhorns and taunting the assembled county commissioners, demonstrators swiftly took over the head table and commandeered the microphone, sending two members of Congress scurrying.

The demonstrators' target, Gingrich, hadn't yet arrived - and his speech was cancelled. When the cancellation was announced, ACORN's foot soldiers cheered.

Editorial writers from Little Rock to Buffalo condemned ACORN's action as an affront to both civility and freedom of speech. Editorialists also pointed out that the "spending cuts" the protesters railed against were imaginary - Gingrich proposed merely to slow the growth in some welfare programs and turn control back to the states.

Yet ACORN had only just begun. Two days later, 50 to 100 of the same protesters hit their main target - a House Banking subcommittee considering changes to the Community Reinvestment Act, a law that allows groups like ACORN to force banks into making high-risk loans to low-credit customers.

The CRA's ostensible purpose is to prevent banks from discriminating against minorities. But Rep. Marge Roukema (R-NJ), who chaired the subcommittee, was worried that charges of discrimination had become an excuse for lowering credit standards. She warned that new, Democrat-proposed CRA regulations could amount to an illegal quota system.

FOR years, ACORN had combined manipulation of the CRA with intimidation-protest tactics to force banks to lower credit standards. Its crusade, with help from Democrats in Congress, to push these high-risk "subprime" loans on banks is at the root of today's economic meltdown.

When the role of ACORN and congressional Democrats in the mortgage crisis is pointed out, Democrats reply that banks subject to the CRA represent only about a quarter of the loans that led to our current troubles. In fact, the problem goes way beyond the CRA.

As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little - since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the "secondary market."

That is, the CRA wasn't enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a downpayment.

So ACORN's Democratic friends in Congress moved to force Fannie Mae and Freddie Mac to dispense with normal credit standards. Throughout the early '90s, they imposed ever-increasing subprime-lending quotas on Fannie and Freddie.

But then the Republicans won control of Congress - and Rep. Roukema scheduled her hearing. ACORN went into action to protect its golden goose.

IT struck as Roukema aired her concerns at that hearing. Pro testers, led by ACORN President Maud Hurd, stood up and began chanting, "CRA has got to stay!" and "Banks for greed, not for need!" The protesters then demanded the microphone.

With the hearing interrupted and the demonstrators refusing to leave, Roukema called the Capital Police, who arrested Hurd and four others for "disorderly conduct in a Capital building" - a charge carrying a penalty of a $500 fine, six months in prison or both. As the police arrived, two of the protesters menacingly approached Roukema's desk, still demanding the hearing microphone.

Requests to the Capital Police to release the activists from Sen. Ted Kennedy (D-Mass.) and Rep. Joe Kennedy (D-Mass,) failed. Then Rep. Maxine Waters (D-Calif.) showed up at the jail and refused to leave until the protesters were released; the Capital Police relented.

Meanwhile, instead of repudiating ACORN's intimidation tactics, Rep. Kennedy berated Roukema for arresting one of his constituents and accused the Republicans of preparing for "an all-out attack on CRA." He also promised to introduce legislation to expand the CRA's coverage to mortgage bankers and large credit unions.

THIS little slice of political life from 1995 had a variety of ripple effects. Above all, ACORN's intimidation tactics, and its alliance with Democrats in Congress, triumphed. Despite their 1994 takeover of Congress, Republicans' attempts to pare back the CRA were stymied.

Instead, Democrats like Rep. Barney Frank (D-Mass.) and Reps. Kennedy and Waters allied with the Clinton administration to broaden the acceptability of risky subprime loans throughout the financial system, thus precipitating our current crisis.

ACORN had come to Congress not only to protect the CRA from GOP reforms but also to expand the reach of quota-based lending to Fannie, Freddie and beyond. By steamrolling the GOP that March, it had crushed the last potential barrier to "change."

Three months later, the Clinton administration announced a comprehensive strategy to push homeownership in America to new heights - regardless of the compromise in credit standards that the task would require. Fannie and Freddie were assigned massive subprime lending quotas, which would rise to about half of their total business by the end of the decade.

WHEN the ACORN-Democrat alliance finally succeeded in blocking Republicans from restoring fiscal sanity in 1995, the way was open to virtually unlimited lending quotas - and to a whole new way of thinking about credit standards.

Urged on by ACORN, congressional Democrats and the Clinton administration helped push tolerance for high-risk loans through every sector of the banking system - far beyond the sort of banks originally subject to the CRA.

So it was the efforts of ACORN and its Democratic allies that first spread the subprime virus from the CRA to Fannie and Freddie and thence to the entire financial system.

Soon, Democratic politicians and regulators actually began to take pride in lowered credit standards as a sign of "fairness" - and the contagion spread.

And when financial institutions across the board saw that they could make money by trading what would once have been considered junk loans, the profit motive kicked in. But the bad seed that started it all was ACORN.

HOW does Barack Obama fit into all of this? Obama has been a key ally of Chicago ACORN going back to his days as a community organizer.

Later, as a young lawyer, he offered leadership training to the activists who were forcing Chicago banks into high-risk subprime loans. And when he made it on to the boards of Chicago's Woods Fund and the Chicago Annenberg Challenge, he channeled money ACORN's way.

Obama was perfectly aware of ACORN's intimidation tactics - indeed, he oversaw a Woods Fund report that boasted of managing to fund the radical group despite its shocking behavior.

And as a lawmaker, in Illinois and in Washington, he has continued to back ACORN's leglislative agenda.

ACORN's high-pressure tactics live on. And congressional Democrats are still covering for ACORN, funneling it money and doing its legislative bidding. ACORN also continues its shady ways, using a vast network of technically separate but in fact quite interconnected organizations to evade federal laws on the politicized use of government money.

Perhaps most disturbing of all, the Obama campaign appears to have little more regard for freedom of speech than Reps. Kennedy or Waters did when they backed up ACORN's thugs in 1995. The campaign actually practices ACORN-style tactics, sending out "action wires" that call on supporters to block Obama critics from radio appearances (a tactic once applied to me) and demanding legal actions against unfriendly political advertisers.

As a presidential candidate, Obama promises a massive national-service program closely allied with the nonprofit sector. He wants to remove "barriers for smaller nonprofits to participate in government programs."

In other words, he plans a massive effort to funnel America's youth into volunteer work alongside the likes of ACORN. So Obama's favorite community organizers may soon be training your child.

ACORN's alliance with the Democratic Party is at the root of the current financial meltdown. And Barack Obama has stayed true to ACORN's ways.

Pretty soon, the folks who poured into the Washington Hilton to shut down Speaker Gingrich in 1995 may no longer need to take over the microphone. They'll be in charge of it.

Don't take this warning from Kurtz lightly. Brian Anderson paints a pretty clear picture of his own in today's Investor Business Daily:

Conservative-friendly media better get ready. Should Barack Obama win the presidency and the Democrats control Congress, as now seems likely, they will launch a full-scale war to drive critics — especially on political talk radio — right out of legitimate public debate.

Signs of what the new environment will be like for the right are already evident:

• When the National Rifle Association recently released television and radio ads in Pennsylvania targeting Obama's history of anti-gun votes, the Obama campaign's general counsel fired off bullying letters to stations that ran the spots, implying that they may have violated public-interest obligations.

• When the 527 group, the American Issues Project, came out with a commercial linking Obama to former Weather Underground terrorist William Ayers, the campaign (unsuccessfully) complained to the Department of Justice that AIP had broken campaign finance laws, and managed to spook some stations away from the ad.

• When two different conservative writers looking into Obama's background appeared on Chicago's WGN-AM Radio, the campaign's "action wire" energized its activists to bombard the station with rage-filled phone calls and e-mails, making the program more difficult to conduct.

(The show, hosted by the eminently reasonable Milt Rosenberg, had on both occasions invited the Obama campaign to send a representative to respond; the campaign preferred to answer with digital brownshirts.)

These crude efforts are only a start.

A Democrat-controlled Washington will use sweeping new rules to shush conservative political speech. For starters, expect a real push to bring back the Fairness Doctrine.

True, Obama says he isn't in favor of re-imposing this regulation, which, until Ronald Reagan's FCC junked it in the '80s, required broadcasters to give airtime to opposing viewpoints or face fines or even loss of license. But most top Democrats, including Nancy Pelosi, are revved up about the idea, and it's hard to imagine Obama vetoing a new doctrine if Congress delivers him one.

Make no mistake: a new Fairness Doctrine would vaporize political talk radio, the one major medium dominated by the right. If a station ran a successful conservative program like, say, Mark Levin's, it would also have to run a left-leaning alternative, even if — as with Air America and all other liberal efforts in the medium to date — it can't find any listeners or sponsors.

Then there are all the lawyers you'd have to hire to fend off the government regulators. Too much hassle, many radio executives would conclude; better switch to entertainment coverage or some other anodyne format. In 1980, it's worth recalling, talk shows of any kind numbered fewer than 100 nationwide, not thousands like today.

And Obama does say he wants to tighten media ownership regulations and expand the public interest duties of broadcasters, including by imposing greater "local accountability" on them — that is, forcing stations to carry more local programming, even if the public isn't demanding it (which it isn't).

This measure — aimed at national syndicators like Salem Radio that make conservative shows available from coast to coast — is just a sneakier way of shrinking the listenership of hosts like William Bennett or Hugh Hewitt, or even getting them off the air altogether.

Obama, like congressional Democrats, also wants to regulate the Internet, the only other medium in which the right does well, via its influential bloggers.

The means here: something called "network neutrality." Neutrality, if enacted, would give government overseers at the FCC the power to ensure that Internet providers treated equally all the information bits surging across the Web's "pipes" — its cables, fiber optics, phone lines and wireless connections.

This measure makes zero economic sense. Broadband providers want to manage more actively — and thus profitably — those information bits. They'd like to offer, for instance, new superfast delivery for sites or users willing to pay more (not unlike how FedEx speeds delivery of packages for a fee), or other new services such as online video or telephony.

Network neutrality would render all that illegal. But why, then, should broadband investors keep building the Web infrastructure needed to keep pace with surging use? Where's their financial incentive?

Yet if that infrastructure isn't in place soon, the vast amount of data pouring online will begin to slow the Web to a crawl, many experts believe. Needless to say, neutrality also will be a gold mine to telecom lawyers, who'll have their hands full figuring out what constitutes "digital discrimination."

But the biggest potential danger of neutrality is that its concern for equal treatment of bits will extend to sites' content, creating a kind of Fairness Doctrine for the Web, as FCC Commissioner Robert McDowell has warned — and as Obama adviser and law professor Cass Sunstein once called for.

Not coincidentally, hampering the alternative media with new regulations would leave the liberal mainstream press, which still enjoys full First Amendment protections, comparatively empowered.

Given how the "MSM" has covered this presidential race — fawning over Obama and pummeling John McCain and especially his charismatic running mate Sarah Palin at every opportunity — it's easy to see why many liberals may be hoping for a media restoration.

Today it's the new "Brownshirts" and the "Thugocracy"; unless America wakes up--and fast--we are only a few months away from a new STASI.

All the Democrats need to make it all happen are your votes.... whether McCain has the cojones to bring it up or not...

DiscerningTexan, 10/13/2008 07:46:00 PM |