Yesterday I followed a link to a new article by Matthew Vadum which named The Greenlining Institute (among similar nonprofits) as the actual cause of the current financial crisis threatening the US economy. I did a double-take: The Greenlining Institute? You mean the one in Berkeley? Answer: Yes. The very same.


I (and countless other people) often zip past the nondescript office on Berkeley’s University Avenue containing the Greenlining Institute — one passes it on the way in and out of the city, as University leads from the freeway to downtown and the U.C. campus.

Unlike most people, though, several months ago I took note of the office as I passed it one day, and asked myself, “The Greenlining Institute” — what the hell is that? When I got home, out of curiosity I googled it and spent a couple minutes trying to decipher their Web site, to little avail. A very few other scattered articles seemed to indicate that the Greenlining Institute existed solely to bully banks and financial institutions into giving loans to otherwise unqualified minority borrowers.

The Greenlining Institute’s own mission statement says,

The Greenlining Institute’s mission is to empower communities of color and other disadvantaged groups through multi-ethnic economic and leadership development, civil rights and anti-redlining activities.

…but Matthew Vadum puts it much more bluntly:

Financial Affirmative Action

When the history of the Great Economic Meltdown of 2008 is written, in-your-face shakedown groups like the Greenlining Institute will be held to account.

Greenlining, headquartered in Berkeley, California (where else?), is a left-wing pressure group that threatens nasty public relations campaigns against lenders that refuse to kneel before its radical economic agenda. Its principal goal is to push politicians and the business community to facilitate “community reinvestment” in low-income and minority neighborhoods.

The Greenlining name is a play on the unlawful practice of “redlining.” That’s when financial institutions designate areas, typically those with a high concentration of racial minorities, as bad risks for home and commercial loans. The Institute wants banks to give a green light to loans in these areas instead.

Recently profiled by John Gizzi, Greenlining uses carrot-and-stick tactics to blackmail public agencies, banks, and philanthropists to achieve its objectives. The Institute brags it has threatened banks into making more than $2.4 trillion in loans in low-income communities.


On a trip through Berkeley today I once again noticed the office, and this time stopped to take these pictures. But there was no news to be found there: just a building, with no one around. And I’m not the kind of person to just walk right in and ask to interview someone. Not that it would have done me much good: undoubtedly I would have been given the usual rigamarole about unfair housing and the need to redistribute wealth to help minorities.

There’s been a lot of finger-pointing on all sides about this financial crisis, but much of it misses the point. The off-topic details about CEO salaries and bond markets and mergers and bailouts and who voted for what all chase the horse after it’s already left the barn. The key question is this:

Once upon a time, banks only loaned money to individuals who could qualify for a home mortgage; and then sometime recently, they changed their practices and started loaning money to a lot of people who didn’t qualify and could not afford to pay back the loans. And when they started defaulting, and when real estate values starting dropping, the entire industry collapsed, because there was no equity to pay back the loans. The banks lost money, the customers lost money, and it all went down the toilet. Which, of course, many people had predicted. So the question is: Why? Why did banks start making countless risky untenable loans to unqualified customers?

And the answer is: Because they were afraid of being called racists by the legal bullies at the Greenlining Institute and other similar “community organizers.”

It all started with The Community Reinvestment Act, a federal law originally passed during the Carter administration and then ramped up during the Clinton years, that was originally designed to prevent racist lending practices by banks who wouldn’t loan money to minorities, even if they were qualified. Which was a fine idea. But over time the law was twisted to force banks to make loans to minorities even if they weren’t qualified — which all may sound very peachy keen in Fantasy Utopia Land but which inevitably spells long-term financial suicide for a bank.

The Greenlining Institute’s self-appointed role is to identify those banks which by Greenlining’s reckoning haven’t doled out enough money to underqualified minority borrowers, and then threaten them with lawsuits, protests, and accusations of institutional racism if the banks don’t start opening their wallets ASAP. And the banks caved. Greenlining brags that they have unparalleled access to banking boardrooms, and they successfully squeezed $2.4 trillion (yes, trillion) in “CRA commitments” (i.e. loans to unqualified borrowers) out of terrified banks. Nearly every bank and financial institution you’ve ever heard of seems to kowtow to Greenlining.

According to this 2005 article in The Berkeley Daily Planet:

With a $4 million annual endowment, Greenlining’s interests are larger than Berkeley, stretching from Sacramento to Washington, DC. Started in 1994 by John Gamboa, a co-founder of the consumer interest law firm Public Advocates, and backed by minority business associations, the institute has fought to extend the benefits of capitalism to inner-city neighborhoods that had been traditionally cut off from access to business and home loans.

“Making the unbanked bankable has always been a top objective,” Turner said.

To persuade banks to serve inner-city clients, the institute has opposed high-profile bank mergers, threatening to demand hearings before the Federal Reserve Board if the bank didn’t agree to invest more in inner cities.

Under pressure from Greenlining, Wells Fargo committed $45 billion to community lending and $300 million to philanthropic causes as part of its 1996 acquisition of Los Angeles-based First Interstate Bank. Washington Mutual, also hounded by Greenlining, agreed to provide $120 million in community lending as part of its 2001 merger with Bank United. Similar concessions have been squeezed out of insurance and utility companies. Greenlining issues annual report cards tracking the institutions’ progress in hiring minorities and serving minority communities.

The organization also retains two attorneys to initiate public interest lawsuits against organizations they feel discriminate against minorities.

Although it fights in the name of the poor and disenfranchised, Greenlining’s close relations with corporate donors and its commitment to economic expansion have also drawn enemies on the left.

Our experience with Greenlining is that they often don’t tell the truth and they’re quick to hurl allegations rather than dealing with the facts,” said Bill Magavern, legislative analyst for the Sierra Club. …
Magavern thinks Greenlining’s environmental policies are rooted in the interests of key donors. “Look at who they take money from,” he said. “Part of their modus operandi is to threaten people until they get paid. We’ve never given them money so that is one of the problems they have with us.”

Tracking down Greenlining’s major contributors isn’t simple. The names of major donors are whited-out on the organization’s federal tax forms. The omission was news to Turner, he said.

He said that corporations accounted for about one-third of the institute’s revenues. The rest, he said, comes from foundation grants and fees from intervening on behalf of the public before the state Public Utilities Commission.

Greenlining faxed the Daily Planet its 2002 tax returns, which listed four contributions, including $250,000 from Washington Mutual, $300,000 from Wells Fargo…[etc.]

Who are these people? And how did they gain so much power, while flying so far under the radar? Their latest push is to force the banks to convert the adjustable rate mortgage loans given to dodgy borrowers into fixed-rate loans, which would further punish the banks financially.

The American Anachronism blog lists some of the other pressure groups who bully banks — including the now notorious ACORN.

How does this connect to the presidential election? According to this 2007 article in the Chicago Sun-Times, Barack Obama’s mysterious years as a “community organizer” were spent doing this exact thing: Accusing banks of racism for not giving loans to underqualified minority borrowers:

Obama represented Calvin Roberson in a 1994 lawsuit against Citibank, charging the bank systematically denied mortgages to African-American applicants and others from minority neighborhoods.

(A case which, by the way, Obama won. Add another risky loan to the pile.)

I don’t have any answers. Just a lot of questions. And a queasy feeling that there may be a lot more to the financial crisis than we’ve been told.

Further reading:
The Greenlining Institute: Shakedown Artists, also by Matthew Vadum

(Thanks to “Honorary Yooper” for the Berkeley Daily Planet link.)

65 Responses to “The Greenlining Institute: Does the financial crisis have its origins in Berkeley?”

  1. 1unclassifiable on Sep 30, 2008 at 8:26 pm:

    Zombie,

    Yes not much on DTN BUT.

    La Raza is deep into this AND deep into McCain.

    We don’t have to even ask about Obama — he’s Acorn’s mouthpiece.

    But for both of those guy’s to plead for a bailout when they have these associations makes me…

    …kind of glad that the brakes got put on even if it was inadvertently through Pelosi’s — umm — I don’t even know what to call that political maneuver she pulled — self-triangulation?

      

  2. 2average_guy on Sep 30, 2008 at 9:05 pm:

    Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three steps:

    Common Sense Plan.

    I. INSURANCE

    A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

    B. In order for a company to accept the government-backed insurance, they must do two things:

    1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
    a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
    b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while
    working with the borrower—again limiting foreclosures and ruined lives.

    2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

    C. This backstop will cost less than $50 billion—a small fraction of the current proposal.

    II. MARK TO MARKET

    A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

    B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.

    III. CAPITAL GAINS TAX

    A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

    B. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
    stand up, speak out, and fix this mess.

      

  3. 3Jack Warner on Sep 30, 2008 at 9:34 pm:

    “The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.”

    Piffle. If you believe that, you likely believe that ‘democracy’ exists in China, or Russia.

    There must be a social contract that extends to all members within a ‘civil’ society. If all is left to amoral free market capitalism, you’ll have a REAL ‘dog eat dog’ Master-Slave ‘local’ economy in no time.

    Democracy is not a game. It is a CHOICE. THINK about why you want to live WITHIN a democracy.
    THINK about ‘civil society’

      

  4. 4Sarah Evans on Sep 30, 2008 at 11:46 pm:

    Jack, the only social contract this country has is a guarantee of equality under the law. There is no guarantee of equality of “stuff” or equality of pay.

    The fact of the matter is, poor people do NOT provide jobs. They do not drive the economy.

    It takes someone who is not afraid of hard work and risk to start a company. That person, if they succeed, will provide JOBS for people who aren’t willing or able to create their own wealth. We shouldn’t be punishing the people who create the jobs and create the wealth in this nation because they happen to be willing to shoulder the burden.

      

  5. 5Ed on Oct 1, 2008 at 12:57 am:

    “The fact of the matter is, poor people do NOT provide jobs. They do not drive the economy.”

    True, to a point. However, working poor people do FILL the job positions provided by the people creating the jobs. So both parties benefit.

      

  6. 6Bob on Oct 1, 2008 at 3:55 am:

    We need a “social contract”? We need to take care of people who bought houses they couldn’t afford? Let’s take care of the poor unfortunates who were duped by predatory lending practices? We need to bail out companies that loaned money to people with little or no chance to pay off the loans? We need to refinance loans of people who took loans they couldn’t afford, had slim chances of paying it back and became losers when the housing bubble burst? Absolute blarney. This mess is caused by social engineering on a grand and insidious scale and groups like Greenlining and the government who forced these bad mortgages on the banks. And who do our dear leaders want to pay for this? Why those of us who obtained mortgages that we could afford only when we could afford them. Those of us who worked darned hard to pay off those mortgages. The folks who gambled forever increasing housing prices, took mortgages they couldn’t afford or developed absolutely junk financial instruments need to bear the brunt of absolutely bad decisions. I doubt very seriously if I elected to default on my mortgage that Pelosi, Franks, Reid or Obama would jump at the chance of paying off my mortgage. Let the pay for their own mortgages or suffer the consequences. If they think they were hoodwinked, then look to the leftists who had some grand idea that went bust.

      

  7. 7DangerousNate on Oct 1, 2008 at 5:37 am:

    Sad but true…

      

  8. 8RUFUS on Oct 1, 2008 at 6:23 am:

    what is amazing is the congressional and candidate deception in word vs. deed.
    both insist that America’s youth should be able to get a college education…..yet by forcing banks to loan money for low income minorities in non-creditworthy situations….the mortgage meltdown has led to a situation where today’s college kids that did the work and finished high school and depend upon bank lending under Stafford financing in order to ATTEND college…are not able to GET the money….and the taxpayers are asked to help the people who most likely failed to manage their own lives and money as adults and bought houses they did not need or deserve with 100% financing forced upon the banks by the Democrats pandering to the Black Caucus and ACORN…and then those groups gave votes and campaign donations to the very same Democrats.

    And Obama talks out of both sides of his mouth….says it is time for America to “step up to the plate”…..Senator, we CANNOT GET TO THE PLATE…THE HOGS HAVE STOLEN THE PLATE FROM US.

    It is time for the minorities and the so called “disadvantaged” to take responsibility for their own personal welfare. If they want an American Dream, then they can suffer to get there like the rest of us.

    No bailout until legitimate adult Americans who do their jobs are on PAR with the “disadvantaged” who have hijacked this economy with bought votes!!

      

  9. 9Phil on Oct 1, 2008 at 6:25 am:

    Relative to Greenlining Institute, I have no doubt that its mission is socialism rather than capitalism. There are of course many questions yet to be answered one of which is this with a little background:

    All banks have a marketing and PR department so it would be much easier and more profitable in the long run for a bank to spend the time and money to refute the threatened anti-captilist nonsense than to change its underwriting process to accept poor or total credit risks.

    If a bank has a solid mortgage loan underwriting process that is in accordance with the law and otherwise utilizes best practices in its other business endeavors, how does some unknown group like Greenlining force it to do anything?

    This is an intriguing story and one that I hope continues until we have answers.

      

  10. 10Mortan on Oct 1, 2008 at 6:38 am:

    Phil,

    The end game is socialism.

    http://www.americanthinker.com/2008/09/barack_obama_and_the_strategy.html

    Their intent is _not_ to get minorities (and illegals) into homes. It is to _disrupt_ our financial system. Pelosi’s goal was not to save the systems, but to bankrupt the government, and encourage more reckless loans.

    We don’t need to do anything, but stop these racketeering groups, and kill the CRA.

    We also need to dissolve Fannie and Freddie and get back on track to responsible lending.

      

  11. 11PaddyJ on Oct 1, 2008 at 6:38 am:

    True enough. This is a root cause of the financial mess.
    However, what are the chances that the far out there leftists (Acorn, Ayers et al) realized that this practice would get them A) votes and support in the short term and B) collapse of the hated capitalist economy in the longer term, simultaneously discrediting the Republican party and opening the door for… guess who?
    Pretty scary, huh?

      

  12. 12USpace on Oct 1, 2008 at 6:58 am:

    .
    Great micro-look at this. I wonder how many ‘Greenlining Institutes’ are out there, and how many’ trillions $$ did they extort in total. It’s a shame politicians and the racial grievance industry forced banks starting back in the 80s to give home mortgages to poor people who weren’t credit worthy enough. Then, they just started lending mortgages way beyond many people’s credit abilities. That’s where all this mess started. And also that they didn’t regulate Fannie Mae and Freddie Mac like they do other banks.

    Alan Greenspan should be exposed for the problems he helped cause by allowing credit quality to be ignored.
    Scary, will sanity ever prevail?
    .
    if money were free
    it would have no value
    - extreme inflation

    .
    ignore credit scores
    give everyone homes
    - like musical chairs

    to deny a mortgage
    must be due to racism

    .
    absurd thought -
    God of the Universe says
    forgive all debts

    settle all accounts
    no one owes anything

    .
    absurd thought -
    God of the Universe says
    make housing costs look cheap

    go paint a rosy picture
    just get people to sign up

    .
    All real freedom starts with freedom of speech. Without freedom of speech there can be no real freedom.
    .
    Philosophy of Liberty Cartoon
    .
    Help Halt Terrorism Today!
    .
    USpace

    :)
    .

      

  13. 13geokstr on Oct 1, 2008 at 7:08 am:

    Am I the only one that finds the perfect timing of this whole “crisis” suspicious?

    Had this all happened several months ago, the political fallout would have been sorted out by now. If it happened as little as 8 weeks from now, it would not have had an effect on the election.

    But just a week after the nomination of Sarah Palin had derailed plans already in place for the coronation of The One, the announcement that we had to bail out Fannie and Freddie was made. In rapid succession, this was followed by the failures of major investment banks, suddenly turning an election that been trending McCain solidly for Obama. Even democrat congressional gains had become questionable prior to this.

    I have not been able to locate, despite extensive googling, anything that will show what exactly caused the announcement of Fannie and Freddie’s takeover to be made when it was. Planning for such a takeover was probably in progress for some time. But usually there is some signal event, say, a negative audit, or bankruptcy proceedings, or stockholder lawsuits, that forces events of this nature to be made public, otherwise the timing of such an announcement is open to some discretion. Financial issues of this magnitude are normally kept quite close to the vest as long as possible to avoid panic until the details can be worked out. Is it possible that the need to sway an election forced the timing?

    Call me a cynic, but I have my suspicion that this problem must have been known for some time to Fannie and Freddie insiders and their supporters in the Congress, and its publication held in abeyance, waiting for the moment when it might be most useful to Obama and the democrats.

    And all this follows the quadrennial Chicken Little economic reporting by the democrat media, which starts about a year before every election where the presidency is either open and/or a democrat is not the incumbent. Note that there was no gnashing of economic teeth before the 2000 election, even though an actual slowdown was occurring 6 months before the election. If there had been, the republicans could have tied Gore to it, and the infamous “chad” scandal would have been irrelevant. Historians will have to sort out how much of a role this incessant politically-motivated gloom-and-doom reporting actually had in making this “crisis” a self-fulfilling prophecy, by depressing consumer confidence to the point that it caused or at least contributed to economic malaise.

    I’m not a conspiracy theorist, but all this seems too coincidental, and I don’t believe that this the first time that events have somehow conspired to help Obama. He managed to get all 5 opponents thrown off the ballot in his first run for State Senator, enabling him to run unopposed. Then in his election to the US Senate, he managed to find a sympathetic judge (in Chicago – now there’s a coincidence for you) to release legally “sealed” divorce records for a strong republican challenger, to discredit him just before the election.

    Is this the nationalization of Chicago machine tactics? David Axelrod, Obama’s campaign manager, came up through the Chicago system as well. Just another coincidence?

      

  14. 14Noah Vaile on Oct 1, 2008 at 7:38 am:

    Very cute. Very true. But it all goes back to the CRA and the government mandate to the private sector to make bad loans. If not for that there would have been no stick. With that mandate to require the bad loan practices “banks” simply found a way to make money (for a time) in a world turned upside down by the government. And of course abetted and abided by “easy” money/credit, also a government program.
    Now F&F are clearly being touted for what they always were- government agencies. And that $700B?
    Read this: http://latimesblogs.latimes.com/washington/2008/09/bailout-plan.html

      

  15. 15Kevin on Oct 1, 2008 at 7:56 am:

    It’s time we stopped allowing this radical, vocal minority to manipulate financial institutions in this way. They have over played the race card 1000 fold and it is time people and companies quite being afraid of whatever name they might call you when you don’t submit to their extortion. Al Sharpton, Jesse Jackson, ACORN or Greenline, it’s time to tell them all that we do not buy their contrived victimhood anymore and will not be kowed by their threats.

    http://www.americanarmed.blogspot.com

      

  16. 16anonymous on Oct 1, 2008 at 8:37 am:

    The Greenlining institute is very active at the California Public Utilities Commission where Greenlining’s lawyers receive up to $400/hour to push their radical agenda. The CPUC, in the past, also supported Greenlining’s “leadership acadamy” for youth.

      

  17. 17Simperin' Fool on Oct 1, 2008 at 9:27 am:

    “There must be a social contract that extends to all members within a ‘civil’ society. If all is left to amoral free market capitalism, you’ll have a REAL ‘dog eat dog’ Master-Slave ‘local’ economy in no time.”

    Not necessarily. From what I gather, one of the big reasons that people oppose capitalism is that laissez faire is naïve and doesn’t work, which is true to an extent under our current system. Unequality is “wrong”, and capitalism supposedly promotes uneven distribution of wealth and power. Therefore, the only way to make things fair is to sacrifice certain rights and force people to do the right thing: socialism.

    I personally don’t believe this is so.

    The first thing I’d like to say is that our economy is hardly capitalist. Most businesses unfortunately seem to be primarily concerned with their own success, and their actions are very domineering in nature. This is more akin to mercantilism, really.

    Capitalism is all about fair trade between consenting individuals. There is a great deal of unfairness and ethical bankruptcy in our society, so true capitalism really only exists on an individual scale, rather than an institutional one.

    The whole idea behind laissez faire, you see, is that the economy should not need to be regulated because people should have the responsibility to regulate themselves. Freedom implies personal accountability, so the only way to have it is to be responsible, which is hardly unreasonable. Therefore, even though we have the right to be completely selfish, we’re still morally obligated to do the right thing.

    Nobody should HAVE to force ethical behavior. That’s why I think capitalism is actually superior to socialism from a moral standpoint.

      

  18. 18anonymous on Oct 1, 2008 at 10:53 am:

    I just read this post about Zombie’s investigation of Greenlining. That’s just the tip of the iceberg. At the California Public Utilities Commission, they pay Greenlining’s lawyers and consultants up to $450/hour to push their radical agenda. Here are links to three examples of CPUC decisions that award Greenlining money for pushing its agenda. There are dozens more. The first page of the document tells you how much Greenlining is awarded, but you may have to read deeper into the document to see the purpose of the award. The last page shows the hourly rates.

    http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/39171.pdf

    http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/49133.pdf

    http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/39155.pdf

      

  19. 19libarbarian on Oct 1, 2008 at 12:22 pm:

    And the answer is: Because they were afraid of being called racists by the legal bullies at the Greenlining Institute and other similar “community organizers.”

    Pathetic.

    Have we become such a bunch of wussies that we excuse stupid decisions because the person who made them would have been called names if they didn’t? Is peer-pressure now a legitimate reason to do stupid things?

    No. Peer pressure isn’t an excuse. Being afraid of being called names isn’t an excuse. Its not an excuse for a 12 year old school-kid and its not an excuse for a mature adult. Anyone who threw their money away to avoid being called names deserves what they got. They could have been men and they chose to be little bitches and now they are going to pay the price for it. If they don’t have the balls to face-down stupid little hippy activists then they don’t deserve my sympathy or respect.

      

  20. 20manny k on Oct 1, 2008 at 4:06 pm:

    Any evidence at all that the loans facilitated by this and similar organizations were actually an important contributing cause of the current crisis? What about all those aggressive ads for ARM loans? Weren’t the banks trying to make money off the subprime loans rather than being armtwisted into an arrangement that they wouldn’t otherwise have wanted? And what about all the investors in the securities? Who was forcing them?

      

  21. 21blankman on Oct 2, 2008 at 5:01 am:

    Let’s take care of the poor unfortunates who were duped by predatory lending practices?

    That’s just the politically correct way of saying “the stupid people that bought homes they couldn’t afford using mortgages they couldn’t carry”.

    And let’s never forget the subset of that group that lied on their applications, overstated their incomes, understated their debts, and so forth.

    And the answer is: Because they were afraid of being called racists by the legal bullies at the Greenlining Institute and other similar “community organizers.”

    That label could potentially see them sued – during Obama’s legal career he represented a plaintiff in a case against Citibank that claimed the bank systematically discriminated against minority applicants.

      

  22. 22Adam on Oct 2, 2008 at 1:31 pm:

    Predatory lenders made money hand-over-fist with sub-prime loans they were “blackmailed” into giving unqualified applicants. What did these lenders do the second the loan was made? Bundle it up with other mortgages and sell them on the market. The actual root of the problem was improper pricing of these mortgage-backed securities because of the failure to properly calculate the risk of default for loans with interest rates that would jump after three years to a much-higher rate.

    This isn’t to say that mortgage-backed securities are evil in and of themselves. The problem was that buyers had no clue about what was actually in the bundles.

    I realize you don’t agree with the goals or tactics of the Greenlining Institute. But it and similar organizations nationwide are hardly to blame for the poor investment decisions of bankers who couldn’t calculate risk.

      

  23. 23montag on Oct 2, 2008 at 2:02 pm:

    Even poor investment decisions can be evaluated for risk management purposes.

    What cannot be evaluated for risk management is financial instruments derived from bad loans, and whose creditworthiness cannot be evaluated, and which have been furthermore rated by Moody’s and Standard & Poor’s as AAA, even though they are destined for default.
    (Please let us not forget the odd behavior of the ratings industry in all this.)

    To claim the genesis of the problem is based in loans to the poor is amusingly disingenuous, reminding us of all the financial depressions in the past, all of which were caused by being too nice to poor folks.

      

  24. 24Jason on Oct 6, 2008 at 7:01 pm:

    By the way, here’s a zombietime logo for Firefox Fast Dial users.

      

  25. 25JimCap on Oct 8, 2008 at 12:21 am:

    Maybe you’re just bigoted.

      

  26. 26JimCap on Oct 8, 2008 at 12:22 am:

    I’m glad people like you are losing.

      

  27. 27Freedom Now on Oct 8, 2008 at 5:12 pm:

    Ahhh so its bigotry now? The race card is never far behind for the so called “progressives”.

    Thats exactly the attitute that kept the Democratic Party lying for years, saying that there was nothing wrong with the GSEs.

    Get a life…

      

  28. 28Fenris on Oct 12, 2008 at 2:11 pm:

    Jason: Haha, that’s epic. Even though it’s about more about the content than the appearance, I am curious as to how zombie would react if (s)he woke up one morning with a fleet of graphic designers at his(her) beck and call.

      

  29. 29Name on Oct 14, 2008 at 11:13 pm:

    Hello ZombieTime

    This is completely unrelated but you don’t leave your email address easily findable so I decided to let you know about it here instead:

    Orgasms for Obama
    http://www.osforobama.com/in/

    Just throwing that out there in case you haven’t heard of it. Another zany event to take funny photographs of. Keep up the good work.

      

  30. 30Ken on Oct 15, 2008 at 12:28 am:

    “you don’t leave your email address easily findable”

    I can’t remember how I found Zombie’s email, but I once did. It’s around somewhere, you just have to look for it.

    Zomb, darling, we’d all love an update sometime soon.

      

  31. 31Kilo on Oct 19, 2008 at 3:58 am:

    “Does the financial crisis have its origins in Berkeley?”
    “Yesterday I followed a link to a new article by Matthew Vadum which named The Greenlining Institute (among similar nonprofits) as the actual cause of the current financial crisis threatening the US economy. ”

    Right. Well you should totally check out some 9/11 Truther websites if you’re this gullible, unconcerned with reality and just like an entertaining read that blames someone you dislike.

    BTW, did Matty happen to say whether he’d be letting the world’s economists in on this big conspiracy theory that none of them seem to have noticed ? Or are we thinking they’ve all been paid off by shadowy men in black helicopters, in unison ?

      

  32. 32kwh on Oct 23, 2008 at 7:37 am:

    All the complicated details about the “bail out”, mortgage-backed securities, toxic assets, CDS and so forth obscure the single cause of the current financial catastrophe: bad investments. The foudation of Freddie’s & Fannie’s investments were sub-prime loans. Around 2004, this amounted to more than half their porfolio. If a house is build on mud…

    The question then is why these bad investments were made. This blog entry nicely describes one culprit.

    BTW, the claim that “greed” was the root cause is idiotic. Bad investments always expose cracks in the system that the “ambitious” will exploit. This doesn’t argue against the system–it argues against bad investments.

      

  33. 33Адам on Apr 10, 2010 at 7:08 pm:

    Это прям в точку!!! По другому и не скажешь! :)

      

  34. 34Cool dude on Apr 12, 2010 at 10:01 am:

    this is the most retarded article i have ever read.

      

  35. 35Water on May 3, 2010 at 10:55 am:

    If you send 3 men, (one White, one Latino, and the other Black) into banks, with the same financial history (credit score, income, debts, etc) asking for the same loan, and even dressed the same, they will receive DIFFERENT offers and interest rates from the lender. Several studies have shown this. Now tell me why we don’t need “greenlining” efforts. This sounds to me like another situation of a privileged person complaining about providing equal space for other people. You know, we can’t just pass laws that make racism illegal. We have to be proactive to change the culture and practices that for so long marginalized certain communities. Anything else would be lazy and selfish at best.

    The connection drawn between Greenlining and the economic crisis is very poor. Their website was clear enough, which I checked, and offers plenty of info not only on their work the financial sector but also their other initiatives including health reform, education, etc. But you didn’t mention any of that. Did you even look at the website? Maybe your search was to no avail because you didn’t find what you were hoping to find. Self-confirming bias much?

      

  36. 36شات كتابي on Sep 27, 2010 at 10:27 am:

    Jason: Haha, that’s epic. Even though it’s about more about the content than the appearance, I am curious as to how zombie would react if (s)he woke up one morning with a fleet of graphic designers at his(her) beck and call.

      

  37. 37شات on Nov 5, 2010 at 5:46 am:

    مشكوور

      

  38. 38ajacksonian on Feb 27, 2012 at 4:23 pm:

    If you are interested in the origins of this mess you have to go before the CRA and its 1990′s add-ons and dig back to the 1970′s. The traditional banking system that you talk about was ended by HUD with the help of Nixon and the creation of GNMA. This was outlined by documents presented to the Subcommittee on Housing and Community Opportunity of the Financial Services Committee of the House of Representatives by Edward J. Pinto on 08 OCT 2009. Of note from the presentation was a piece of research done by the FDIC in the late 1990′s which saw a disconnect in the Loan to Value ratio and did their best to track it down.

    The precursor to the CRA was the GNMA and the ability of large banks to create bundled ‘securities’ out of mortgages that were then graded by GNMA. Local S&L’s with limited knowledge of the larger banking system could not compete against larger institutions which could come in to undercut the local lenders due to the commercial banks having deeper pockets outside of home mortgages. It was the deline of the S&L’s that drove the CRA into being put together… which means that monetary power was concentrated into the hands of GNMA (plus the other parts of the FHA) via legislation. There was NO national market for lending before the securitized system was set up and commercial banks allowed to lend into that securitized system which had government risk backing.

    LTV’s also changed due to the invention of IRA’s by government, which offered a final safe haven for money that was protected against bankruptcy. Homes moved from being a place to live to being an ‘investment’, and with those two things in place LTV’s began to be de-coupled from their pre-late 1960′s levels as people came to ‘expect’ to make money off the sale of a home. The initial CRA interject political directives into this system and the later add-ons then start to lower the requirements for banks to make loans.

    If you want to un-rig the system you have to get rid of the entire FHA system, get the government out of securitizing loans and telling what the loan requirements should be, which means getting rid of the CRA and all its follow-ons. Then slowly side-line commercial banks and encourage start-up local institutions that know demographics, businesses, industry and can deal with people on a personal basis and make loans not only to those who can afford them, but to help stabilize local markets and economies.

      

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