Can you hear that great sucking sound? It’s the sound of government shrinking around the world, as Portugal just joined Greece, Ireland and soon many others in acknowledging they are bankrupt and asking their European brethren for a bail-out. What is frightening to the big government advocates is this collapse was caused by a doubling of Portugal’s borrowing costs in just three weeks. The klaxon horns are going off in Europe and America; cut deficit spending or be destroyed by rising interest rates.

Over the last two decades, governments in Europe and the United States have been massively using taxpayer subsidies to sponsor favoured industries, under the smoke screen of National Industrial Policy. The theory, developed by Harvard economist and former Secretary of Labor in the Clinton Administration, Robert Reich, stated that governments must “deliberately and strategically” speed the movement of capital and labor into “higher-valued production” or suffer social decline; with infant mortality rates rising and employment and life expectancy falling. Reich championed National Industrial Policy planners would more efficiently allocate capital and labor resources to satisfy consumer demand than large corporations who inefficiently use marketing to bend customer demand to their needs. He claimed it was the duty of government to induce through direct subsidies and worker retraining grants uncompetitive companies to scrap production and steer investment in industries of the future.

Europe adopted National Industrial Policy through the introduction of the Euro currency and banking deregulation. Southern European countries like Portugal, Italy, Greece and Spain got low-interest German and French bank loans to scrap supposedly uncompetitive local manufacturing and “cushion” the transition of workers into leisure services and retirement housing development. Germany and France got elimination of competition and export growth to Southern Europe. Europeans were ecstatic for 15 years; the South had a real estate and banking boom, the North had a manufacturing and banking boom.

The U.S. adopted a National Industrial Policy during the Clinton Administration in 1999 by tying bank deregulation to a colossal expansion of the Community Reinvestment Act. The big banks got unlimited ability for multi-state banking and abolition of the 1933 Glass–Steagall Act prohibitions against banks engaging in high risk securities and derivative trading for their own accounts. Planners got huge quota requirements for loans to inter-city and rural communities. President Clinton hailed that the signing of the Gramm-Leach-Bliley Act “establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act”.

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In the wake of recent reports that Shorebank’s financial status worsened in the second quarter, some interesting new developments have surfaced.

Yesterday afternoon, Fox Business News reported that Shorebank will now be the target of a federal investigation, to look into whether political pressure was exerted on Wall Street banks to give money to help the troubled Chicago community lending bank reach the monetary threshold needed to allow the bank to qualify for federal TARP funds.

Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (TARP), has said that he will begin looking into whether or not top-level political operatives (e.g., Eugene Ludwig, former comptroller of the currency under President Bill Clinton) and FDIC chief Sheila Bair were involved in exerting direct pressure to force Wall Street banks such as JP Morgan Chase, Goldman Sachs, and others to give money (which now totals more than $150 million) to the ailing bank.  Interestingly enough, Shorebank has been involved in raising private capital to qualify for TARP funds despite the fact that Shorebank senior vice president Michelle Collins emphatically stated just last year that Shorebank would take “no TARP money.”

Although the Obama administration has officially denied any involvement in helping to prop up Shorebank, the rush by other banks to come to its aid has been nothing short of remarkable.  More than a few eyebrows have been raised in response to the general flurry of activity shown by other, larger banks seeking to involve themselves in helping to rescue Shorebank.

For example, Lloyd Blankfein, Goldman Sach’s chief executive, was personally involved in making phone calls to encourage other Wall Street banks to inject capital into the the failing Shorebank.  This, in a stated effort to allow Goldman Sachs to fulfill its obligations under the 1977 Community Reinvestment Act.  (Interestingly, Ron Grzywinski, one of the founders of Shorebank, was the only banker to testify before Congress in favor of the Community Reinvestment Act.)

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The Central Illinois 9/12 Project became one of the first to expose — beginning this past March on BigGovernment.com – Shorebank’s extensive green and microfinancing agendas, in anticipation of that bank’s impending bailout.  Shorebank, a Chicago-based, community-based investment bank, is focused on domestic and foreign microfinancing, is heavily engaged in the financing of “green” projects and “green” jobs, and has a host of ties to the Obama and Clinton administrations.  Most recently, we wrote in April about Shorebank seeking a “bailout” from larger financial firms that have previously received bailout money from the federal government. Congresswoman Jan Schakowsky had previously proposed that the bank receive funds from the State of Illinois to help cover its loss of capital since the beginning of the nation’s economic downturn in 2008.

As we previously wrote, Shorebank would potentially be eligible for TARP funds if it were to be recognized as a “Community Development Financial Institution.” In order to to received needed federal TARP money and prevent seizure by the FDIC, Shorebank needed to receive appropriate matching funds from private sources.  News stories have been released over the past several days indicating that Shorebank has potentially received such funding.

Shorebank has reportedly received $20 million from General Electric, $20 million from Goldman Sachs, and $20 million from Citigroup – with additional large funds being promised by J.P.Morgan Chase, Bank of America, and Morgan Stanley. Shorebank also has received funds from the Northern Trust Corporation, State Farm, and Harris N.A.  It has been reported that the bank could also receive funds from Wells-Fargo and PNC Financial Services.  Assistance from these financial institutions puts Shorebank’s raised capital from private sources within the range needed to make it eligible for TARP funds.

As we reported previously, Citigroup, Bank of America, and Chase all received tens of billions of dollars in taxpayer money from TARP.  Does this then mean that Shorebank is being bailed out by bailout money?

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The left-wing militants of SEIU and the National People’s Action group plan to shut down K Street, the heart of the lobbying industry in the nation’s capital, at a massive in-your-face rally and march planned for Monday.

The goal of the “action” –in organizing parlance— is a show of force calculated to intimidate bank lobbyists and show support for sweeping anti-bank legislation pending in Congress.

The action, called The Showdown on K Street, is listed at the website of Jobs With Justice. JwJ works closely with ACORN, other community organizing groups, and the labor movement.

“This is the first time that they’re going to hit K Street all out,” said a source in the progressive movement. “They want to intimidate bank lobbyists, who aren’t used to this kind of confrontation.”

“It’s an anti-Wall Street march. In many ways it mirrors what happened on Wall Street about a month ago.”

The source was referring to another in-your-face anti-bank march on April 30 in New York City’s financial district led by National People’s Action (NPA). Also known as National People’s Campaign, the Chicago-based organization filed its first tax return in 2008.

As Andrew Marcus reported, the federal government cut off funding for NPA’s sister organization, the National Training and Information Center (NTIC) in 2003. Investigators found NTIC had misused millions of taxpayer dollars by spending them on training community organizers to lobby the government instead of on community development projects. NTIC also committed fraud by carrying out a cover-up.

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Today it was reported that Goldman Sachs CEO Lloyd Blankfein has been calling Wall Street friends to cough up $125 million to save ShoreBank, which faces federal closure next week. Rep. Jan Schakowsky suggested in January that Illinois taxpayers foot the bill. That would have been the first state-led bank bailout in U.S history. The idea was abandoned–so it appears the government is shaking down Goldman Sachs instead.

ShoreBank has close connections to the Obama administration, including controversial figures such as former “green jobs czar” Van Jones. Its executives have contributed in the past to Rep. Schakowsky and other Illinois politicians. ShoreBank did not just make loans in poor communities–there are other local banks that do that without getting into trouble–but also specifically made loans that the recipients had little hope of repaying.

Now ShoreBank is calling in some political favors, and the politicians are responding with a classic Chicago-style shakedown. It is probably no coincidence that Goldman Sachs suddenly took an interest in ShoreBank after it was slapped with a federal civil fraud lawsuit and a criminal investigation. Many Wall Street observers believe that the charges against Goldman Sachs were politically motivated, in timing if not in substance.

Regardless, Mr. Blankfein got the message, telling Goldman Sachs shareholders last week that he would try to rebuild the company’s image. He called up other bailed-out institutions that are being threatened with federal charges–Bank of America, Citigroup, and JP Morgan Chase–and got them to cough up millions for ShoreBank. So although the ShoreBank bailout is “private,” American taxpayers are still indirectly on the hook.

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On April 30th, Progressives marched on Wall Street to vilify Wall Street banks and bankers. Who organized that march? It was a group called National People’s Action (NPA), and their anti-capitalist campaign is ominously titled Showdown In America.

You might be thinking “Crap. Not another Alinsky community organizing group and its damn acronym!” – but this is one to which you need to pay very close attention. This group is at the very center of the real estate bubble-bust brought on by the dreaded CRA, and they are organizing an army of unions to march on Wall Street and blame the entirety of the economic disaster on the evil rich.

The first thing that you need to know about NPA is that their now-deceased leader, Gail Cioncotta, is credited in community organizing circles for authoring the Community Reinvestment Act. Her group is also credited with honing the tactic of storming into banks and occupying their lobbies.

Another thing you need to know is that in 2003, NPA’s sister organization, the National Training and Information Center (NTIC), was busted by the Justice Department for misappropriating millions of federal grant dollars from community development projects,  using the funds instead to train community organizers to lobby the government. On top of that, the Justice Department found that they committed fraud as they tried to cover up their actions.

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As self-righteous Senators grill Goldman Sachs about their role in the housing bubble, it would not be far fetched to request that the Senators switch seats with the Goldman executives.

After all, it wasn’t Goldman that passed the Community Reinvestment Act that forced banks to make loans to people who could never pay them back. It wasn’t Goldman that created and supported Fannie Mae and Freddie Mac. And it wasn’t Goldman that drove interest rates down to a below market level to cause a housing rush not seen since gold was found in them thar’ hills in the mid-1800s.

But if Senators were really interested in finding out the cause of the housing bubble, they would call one Eric Stein to the dais.

Mr. Stein is currently that Deputy Secretary of Treasury for consumer protection and is likely to head the vastly powerful Consumer Bureaucracy currently being pushed by big banks and Wall Street. But prior to his appointment to Treasury, Mr. Stein the bag man for the Center for Responsible Lending and its many Self Help subsidiaries, was singly responsible for more bad loans than all Goldman employees together. Working with billionaire con-man John Paulson, Stein lobbied to pass the laws at the root of the crisis and pressured banks to make bad loans that caused their portfolios to collapse when the economy turned. They were the Bonnie and Clyde of the subprime mortgage world.

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The left-wing architects of the subprime mortgage collapse have yet to be called to account.

Much has already been written about the possibly criminal conduct of Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), who relentlessly gamed the political system to clear the way for their friends at government-sponsored Fannie Mae and Freddie Mac to make billions at the expense of taxpayers, but very little has been written about the role that their liberal friends and allies in the private and nonprofit sectors played in bringing the U.S. economy to its knees.

Funded by huckster John Paulson and predatory lending kingpins Herb & Marion Sandler (who also gave generously to ACORN through the years), the inappropriately named Center for Responsible Lending (CRL) laid the foundation for the current financial crisis.

The media seems barely to have noticed that CRL’s puppet, Eric Stein, is now leading the Obama administration’s push to Sovietize the American banking system. Stein, who is now the U.S. Treasury’s deputy secretary for consumer protection, was previously a vice president at CRL.

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In old movies (and a lot of new ones too), there is the usual formula of romantic tension between the leading man and the leading lady.  They usually start out hating each other but ultimately find themselves drawn to each other.  This usually culminates in a climactic argument, during which the woman expresses her total contempt and disdain for the man:  “I hate you!” He then grabs her, pulls her close, and plants a big, passionate kiss on her.  She, of course, succumbs, and the two then declare their undying love for each other.

President Obama and the Democrats are engaged in this coy Love-Hate faux drama with Goldman Sachs and the rest of Wall Street.  Obama has railed continually against the “fat cats” on the Street, whom he blames loudly and repeatedly for the financial crisis.  They do, of course, bear some of the responsibility.  But wouldn’t it be nice and refreshing to hear him level
his ire at the ACTUAL main perpetrators of the crisis: Fannie Mae and Freddie Mac?   Of course, he can’t do that, because that would mean admitting fault with the social engineering of the Jimmy “My Name is Earl” Carter and Bill “Bubba” Clinton-supported Community Re-Investment Act and other misguided and destructive left-wing economic policies.

No, he’s stuck to the safe script: the surefire populist message that all of the banks are bad, Goldman is the worst of the worst, and that they need to be spanked like a Terrible Twos Terror Child.

Just one problem:  Obama accepted nearly $1 million from Goldman folks during the 2008 presidential campaign.

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The activity surrounding the controversial Consumer Financial Protection Agency (CFPA) in the financial reform legislation is really picking up these days.  But many Americans would never know it.  It seems Democrats may have learned something from the experience of the health care bill after all.  In their efforts to avert a repeat disaster of losing control of the message, they appear to be taking every step necessary to ensure that the public engages as little as possible in this debate.

But I assure you, this is a debate that the American public should engage in, pronto.

Because behind the scenes, certain lobbyists are quietly but aggressively scurrying about, pushing hard for the passage of the CFPA in a power grab by the Executive Branch that would dwarf the Health Care Reform bill and the Patriot Act.  And with the passage of the proposed CFPA, one man in particular with a history tied to some of the deepest tentacles in the financial crisis – and to the Community Reinvestment Act changes of 1995 – would gain the power to selectively manipulate the entire landscape of the financial, small business and housing markets.

Last week, we reintroduced you to an early trigger in the financial crisis, with good reason. In “Death by Senator: As Financial Reform Looms, We Revisit IndyMac,” we revisited the role that Senator Chuck Schumer’s (D-NY) very public letter played in the fall of one financial institution.  As I ended that piece, I teased that there was more to the story that would soon follow.

So, let’s pick up from June 30, 2008.

Merely days after the now infamous Schumer letter triggered a run on the bank that would total over $1.3 billion, this lengthy and scathing report was released to the public:

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The Shorebank story is quite complicated and filled with literally hundreds – if not thousands — of individuals who have been in some way involved in the unfolding of an intriguing saga. It has been difficult to narrow down the field of characters in order to focus on just a few. Some of the names are familiar, and some are relatively unknown (except, perhaps, within the context of their own circles of influence).

The original founders of Shorebank probably didn’t dream that this bank would have the worldwide influence that it now has. They were all very active in their communities and had a desire to see the South Shore neighborhood re-built to its former state of safety and community life. The neighborhood had suffered economically and was becoming run-down and plagued by crime. Their hope was to re-invest and re-enliven this neighborhood of Chicago. They made loans towards the renovation of many of the buildings which were deteriorating and in disrepair. They also invested in new building projects to benefit the residents of South Shore.

For 30-plus years Shorebank has seen its founders’ dreams realized; and beyond those dreams, Shorebank has become the catalyst for international financing — especially that directed toward low-income people in many countries of the world. The Community Reinvestment Act, passed into law in 1977 during President Jimmy Carter’s term of office, encouraged financial institutions to make loans to low-income borrowers. Ron Grzywinski (one of the original founders of Shorebank) was the only banker to testify before Congress in support of the Community Reinvestment Act. Its passage was instrumental in paving the way for Shorebank’s success. The bank steadily grew financially and facilitated the renewal of poverty stricken areas through the rest of the 1970’s and early 80’s, catching the attention of then-Governor Bill and Hillary Clinton of Arkansas (in fact, according to the IFA, Bill is still advocating on behalf of ShoreBank).

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On Wednesday, we brought you the story of a little report from the Boston Fed and its role in creating the housing bubble. In that piece, we mentioned an organization you probably hadn’t heard of before, the Center for Responsible Lending. It is one of the more influential–in a bad way–organizations you don’t know. Over the coming weeks, we’ll lift the veil on this organization. Consider today’s installment a primer.

The Center for Responsible Lending is the most influential liberal advocacy group dealing with the financial services industry in the nation’s capital. It is the policy arm of credit unions based in North Carolina and California. Yes, its parent organization has a vested interest in the outcome of CRL’s advocacy.

The Center performs both public policy research and lobbying. (Lots of lobbying, but that is for another day.) Despite its well known left wing prejudices, the media uncritically accepts the Center’s published papers, giving the group extra heft on Capitol Hill.

The Center aggressively criticizes lending discrimination and pushes lenders to increase their underwriting to poor neighborhood where borrowers are less likely to be able to pay back mortgages. The Center is keenly interested in the redistribution of wealth and cares little about the financial safety and soundness of the banks it targets.

Lenders who fail to cooperate with the Center are accused of “redlining,” i.e. illegally discriminating against borrowers in low-income neighborhoods.

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In the midst of the radical social atmosphere of the 1960s, a group of Chicagoans, Ron Grzywinski, Milton Davis, James Fletcher, and Mary Houghton, came together to found South Shore Bank in the 1973 with a goal to provide loans to minority owned small businesses.

Ron Grzywinski had banking experience with Hyde Park Bank. Milton Davis was a University of Chicago employee and the Chicago leader of the Congress of Radical Equality (CORE).  James Fletcher had previously worked in President Johnson’s administration as part of the internal transition team and with the Citizen’s Action Program in the Office of Economic Opportunity.  Mary Houghton, at that time, was running a daycare program for low income families.

These four individuals had often met to discuss ways in which they could help the needs of urban society by becoming a financial intermediary for social development and community actions. These discussions led to the creation of a minority lending program at Hyde Park Bank. With the influence of Al Raby, a Chicago black rights leader, they looked for the next step to continue their goals of providing loans to small businesses in neighborhood development. Grzywinski stated, ” community-based organizations appeared to be the only organizations in society that cared about the broad range of needs that exist in urban communities”.

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At a speech at Claremont McKenna to honor Martin Luther King Jr. in mid-January, the subject of Jesse Jackson Sr.’s new ire was the “banksters” — Wall Street fat cats, who are causing all of our problems.

Naturally, Jackson ignored his own role in housing crisis. That he made his argument against banks at one of the schools that produces the most investment bankers in the country did not go unnoticed – however. Those hoping to listen to watch his entire speech can watch it here.

Jackson decried the “biggest shift of wealth in American history in the last 9 months.” He assailed Obama’s so-called spending freeze. “We’ll freeze the rich in their wealth and the poor in their poverty. . . . Freeze? They have already frozen modifications of home foreclosures.” And he applauded Roosevelt’s “direct investment in the poor” and for “breaking up their ability to be indifferent to the poor.” “Banks serve at the privilege of the state and their mission is to lend and invest,” he said, not presumably to get paid back.

Of course much of the speech sounded like the usual socialist rhetoric, which he claimed Martin Luther King Jr. was trying to “take us there” – wherever there is.

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Like a phoenix released to spread it wings, ACORN founder and former chief organizer Wade Rathke has been letting it all hang out on his lively, but troubling blog.

He recently attacked no-nonsense Arizona Sheriff Joe Arpaio, lamented the continuing questions regarding ACORN/SEIU involvement in the 2010 census, and even went after me on one occasion.

Now he’s attacking the concept of personal responsibility, something our society is sorely lacking. He’s encouraging homeowners who are falling behind on their mortgage payments to simply walk away from their homes, as if the money still owed is neither their problem nor their concern.

At least his message is consistent, because Rathke has always been the Johnny Appleseed of bad advice when it comes to housing.

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In 2007, the FDIC set up an ill-conceived program for 30 banks to offer short-term loans of up to $1,000, at a maximum APR of 36%.  They thought this “Affordable and Responsible Consumer Credit” program would prove that lenders could make a profit under these conditions while still serving the consumer’s needs.

The results are akin to the hapless ski jumper at the opening of Wide World of Sports, who slips, falls, flails, smashes through a banner, and lands with a resounding thud on the landing pad.

While payday loans are approved in a mere 15 minutes, most of these FDIC-sponsored loans took more than 24 hours to approve — failing consumers who needed their funds immediately; some required direct deposit, credit checks and possibly a financial literacy class or collateral (none of which are required for a PDL); some required a portion of the loan be put on deposit (not part of the PDL process); only a few thousand loans were made because of said inconveniences (compared to 100 million loans annually for PDLs due to their convenience); and none of the institutions actually made a profit while some lost money, even when including an origination fee of up to $50 (whereas PDL’s profitability allows them to be widespread and easily accessible).

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I participated in listen-only mode in the teleconference call Monday in which ACORN’s allegedly independent “audit” was released.

I regret it was difficult to make out what the players were saying.

That’s because as the left ferociously circled the wagons, all the creaking wheel noises in the background drowned out much of what was said.

Scott Harshbarger, ACORN ally and former attorney general of the Commonwealth of Massachusetts

One the main points that ACORN ally and former Massachusetts Attorney General Scott Harshbarger and ACORN CEO/chief organizer Bertha Lewis were trying to make was that ACORN, i.e. the lead entity that controls the ACORN network, and ACORN Housing, are separate entities.

Because ACORN Housing and ACORN are different organizations neither is responsible for the other, they argued. In other words, ACORN is not responsible for ACORN Housing employees caught on video encouraging illegal behavior, and vice versa, they reasoned.

Harshbarger said on the conference call

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ACORN has been fairly criticized for its actions that led up to the mortgage crisis, which culminated in a huge rash of foreclosures last year.  While the tide appears to be waning, it’s a problem that is still occuring.

Specifically, ACORN strong-armed banks and worked with members of Congress, such as Barney Frank, to weaken credit standards in order for banks, as well as Fannie Mae and Freddie Mac, to fund risky mortgages.  Mortgages, of course, that stood little chance of ever being paid, as we witnessed last year.

But ACORN’s penchant for shaking down banks didn’t begin 2 years ago, or even 10 years ago.  Check out this article from the Atlanta Journal-Constitution from 1988.  Grant Williams was an organizer for ACORN at the time ( I wrote here about his new gig at SEIU), and he managed to weasle ACORN into a bank’s proposed interstate merger.  From the article:

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Reading this account of discussions at the “U.S. Federal Trade Commission workshop on the future of journalism in the Internet age,” it appears “legacy media” might just slash and burn the First Amendment, shredding it to pieces on their journey to statist organ status.

In their desperation to stay alive, as newspapers and other legacy channels of distribution collapse, surviving publishers will maneuver themselves for prime suckling positions on the public teat. The keepers of the teat appear willing to enable the feast.

Federal and state officials this year have explored how the government might play a role in helping ease the financial travails of news organizations. Sen. Benjamin Cardin (D., Md.) this spring proposed a bill that would allow newspapers to operate as tax-exempt institutions. [MORE - WSJ]

“Public” money comes with a labyrinth of exponentially multiplying political strings attached. Just ask GM, AIG, and BofA.

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Having purchased, rented, or placed a down payment on all the political influence up for sale in America, leftist troublemaker George Soros now plans to ramp up his war on markets worldwide by creating an “Institute for New Economic Thinking” (INET).

“The system we have now has actually broken down, only we haven’t quite recognized it and so you need to create a new one and this is the time to do it,” Soros told the Financial Times last month.

Soros said he wants Communist China to run this new financial system. “You really need to bring China into the creation of a new world order, a financial world order,” Soros said.

If that doesn’t send a chill down the spines of freedom lovers in America and elsewhere, nothing will.

In an interview with Der Spiegel last year Soros said European-style socialism “is exactly what we need now. I am against market fundamentalism. I think this propaganda that government involvement is always bad has been very successful — but also very harmful to our society.”

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