I am planning to buy a new car at the end of this month. I believe I am long overdue for a change – I am driving a 15-year-old Nissan Altima with a busted radio, no air conditioning and patches of rust around its exterior. It also just started making funny noises, which may not be that funny if the vehicle conks out on a lonely highway or at a busy intersection.
No, you haven't tuned into ‘Car Talk’ by mistake. I am mentioning my dying car because there comes a time when you have to get rid of things that longer work properly. If something isn't worth fixing, it is usually a good idea to get rid of it.
That logic is being employed by Rep. Steve King, R-Iowa, who has been talking up a proposal to scrap the Community Reinvestment Act of 1977 (CRA). King claims CRA is a ‘costly mandate’ and that it encouraged banks to lend money to people who could not repay their borrowed funds. King feels CRA isn't worth fixing, so it needs to go.
CRA, of course, never encouraged irresponsible lending. If anything, it put the onus on financial institutions to create and maintain highly responsible lending to urban and rural communities that were long denied access to credit. As the New York Times pointed out last week, CRA encouraged the investment of more than $4.5 trillion in the past three decades. For many communities, particularly where the demographics were predominantly African American and Hispanic, CRA funds helped create a first generation of homeowners.
Running simultaneous to this attack on CRA is another smack against ACORN, a 38-year-old nonprofit group that has been among the most vocal supporters of CRA. ACORN has suddenly become the new villain in Sen. John McCain's escalating attacks against his rival in the presidential campaign, Sen. Barack Obama. McCain has charged ACORN with mass voter registration fraud designed to favor an Obama victory.
But why ACORN? There are many groups trying to register voters that would favor the Democratic presidential candidate. I suspect ACORN is being targeted because McCain wants to secure support among the financial community. Anyone who has worked in banking and insurance will recognize the ACORN name for its accusations of redlining and other dubious practices by the nation's financial services providers. As I see it, ACORN is being singled out by McCain as a thinly veiled message to the industry: I stand with you against these community development busybodies. No one asked McCain if he supports the King proposal, but I wouldn't be surprised if he found merits in that plan.
But the problem isn't ACORN, just as the problem isn't CRA. Today's crisis was spurred by recklessness at a mass level: by lenders who failed to conduct proper risk management and due diligence, by borrowers who made purchases far beyond their means, by federal regulators and elected officials who refused to acknowledge there was a serious problem until it was too late, and by industry leadership that was not willing (and, to a large extent, is still unwilling) to admit they dropped the ball.
Unlike my ailing old car, CRA isn't broken, and it doesn't need to be fixed. And just as it would be silly to blame ACORN for the dilapidation of my vehicle, trying to turn that venerable community advocacy group into a hideous threat to national and industry well-being is inane. Nothing is going to be fixed if we try to create scapegoats where they don't belong.
– Phil Hall, Secondary Marketing Executive