How Clinton and Obama Gamed America's Financial System to Expand Their Party's Power
Since FDR the Democratic Party has continually developed new strategies to keep itself in power; from taking political control of the largest urban areas of the nation to expanding voter lists with illegal immigrants. In the past twenty-five years, the greatest economic change to the U.S. was the unprecedented growth of government debt and spending. It is interesting to explore whether Democrats played any active role in what is known as the mortgage meltdown and if so, whether their actions were motivated by political gain.
It is widely accepted that the 1992 Community Reinvestment Act fostered the growth of subprime mortgages. At the same time there was an interesting growth in the power and influence of ACORN on Democratic Party elections. Both Obama and Clinton acted to enhance ACORN’s Democratic voter registration activities.
In 1993 Clinton signed the “Motor Voter” law, empowering ACORN to register hundreds of thousands of Democrats nationwide. Barack Obama became involved with ACORN in 1993 when he agreed to run a successful voter registration drive for ACORN affiliate Project Vote. In 1995 he successfully sued the state of Illinois to enforce the Motor Voter law. He rose to become a trainer of ACORN staff and then joined the board of the Woods Fund where he funneled substantial grants to ACORN.
In the 1990s as Fannie Mae and Freddie Mac started their strategy to lower home mortgage underwriting standards ACORN became the major player in a scheme to use banks to funnel money directly into Democratic campaigns across the nation.
At that time, big banks in the U.S. wanted to merge into mega-banks to achieve economy of scale and greater market access. Congressional Democrats knew this and devised a way to use the banks’ merger plans to give financial support to their activist groups. The scheme involved authorizing activist groups to represent community housing concerns at Federal bank regulator meetings. At these meetings, activists could sway regulators into approving a bank’s merger by giving the bank a high CRA -- Community Reinvestment Act -- rating.
Banks were then pressured to enter into explicit partnerships with an activist group in advance of a Federal regulator hearing so the activists could help them gain the Feds’ approval. A group called the National Community Reinvestment Coalition published a 101-page guide instructing activist groups on “how to negotiate with banks that were in the process of merging.”
Activist groups entered into long-term contracts with banks guaranteeing specific commitments for home mortgage and small business lending that would be “channeled through the activist groups themselves.” Financial institutions believed that in the future Federal agencies would cover any potential financial losses[viii] incurred by these high risk mortgages.
The dollar amounts of these agreements were staggering. Between 1977 and 2007 there were 376 such agreements involving credit commitments of $867 billion. In addition, these activist groups were paid “fees and contributions” of over $9.5 billion. ACORN alone received $39.9 million in fees for administering programs through their community groups. Husock called this the “Trillion dollar bank shakedown.”
By 2004, ACORN had an annual budget of $40 million and offices in eight hundred fifty poor neighborhoods. That year ACORN and Project Vote registered 1.15 million new voters and mobilized 4,000 workers to get out votes on election day. The tendency for ACORN to abuse registration requirements is now legendary. In Kansas City, Missouri four indicted ACORN workers pleaded guilty to vote fraud and 40% of the 35,000 registrations submitted by ACORN were proven to be bogus.
The entire CRA home lending program was primarily run by Clinton to benefit the urban areas run by Democrats. In a July 1999 speech President Clinton boasted: “over 95% of the community investments… made in the 22 years of that law have been made in the six and a half years that I’ve been in office.” The total value of subprime GSE mortgages created by this government sponsored scheme was $5.25 trillion. The loans done through Federal housing agencies were kept off national books.
Three Democrat goals were achieved here. The first was to inject liquidity into the large Democratic cities. Secondly, it supported 1990s illegal immigrant home ownership and construction jobs for immigrants, enabling Democrat unions to keep jobs in shrinking cities.
The third goal was to channel the agreement money to national activist groups to finance demonstrations and get-out-the-vote Democrat campaigns. The Neighborhood Assistance Corporation of America (NACA) had, by 2012, obtained $13 billion in bank commitments from large banks including Citibank and Bank of America. To this day, NACA brokers home loans requiring no down payment, no closing costs, no fees, no income limit, and poor credit as long as applicants first agree to participate in at least five actions per year, including demonstrations against financial exploitation, economic injustice, black lives matter, etc. This proves the unconstitutional, direct financing of political activities through financial market manipulation.
The growth of high risk mortgage loans and refinancings created the massive bubble that caused the 2008 equities collapse and decimated the value of public pension funds. Obama took unprecedented steps to restore the pensions of public sector unions. By 2014 he used Treasury to purchase $1.8 trillion of the bad MBS debt created by Federal housing programs.
QE programs successfully restored funding levels of the public sector pensions. Since the public unions give one hundred percent of their campaign contributions to Democrats, the money he printed will be kicked back to support his Party’s campaigns. This is the ultimate banana republic-style act of financial corruption: printing money to reward Party loyalists.
The QE program was also done off the books, i.e. without Congressional approval. It is not recorded as national debt, only as a liability on the Treasury’s balance sheet of $4.5 trillion. In effect, the Treasury Dept. was used to bail out government housing programs for the money Clinton made available for housing aid to Democratic cities, public sector unions, and campaign activities of pro-Democrat groups. These were not direct money transfers, but used second and third order actors.
Obama performed another role: he expanded his party’s control of investment banks through Dodd-Frank. That bill puts control of major players of the financial markets into the hands of a few presidential appointees; a financial oligarchy.
All of these actions were taken with the goal of financing the Democratic National Machine.