An Obama Treasury department official behind the consumer protection language in the proposed financial reform legislation is a former head of the Center for Responsible Lending (CRL), the advocacy wing of a non-profit community development lender funded by none other than John Paulson — the billionaire who worked with Goldman Sachs to package bad mortgages into securities and offer them on the market.
President Obama’s deputy assistant secretary for consumer protection Eric Stein served as senior vice president of CRL. He also served as the President/SEO of CRL’s parent network, the Center for Community Self-Help.
While both groups pitch themselves as non-profits interested in helping the disadvantaged, the organizations dealt in the very kind of advocacy that advocated mortgages for those who couldn’t afford them. As BigGovernment’s Liberty Chick notes:
After the Community Reinvestment Act (CRA) was passed in 1977, most of its implementation began rolling out around 1979. And in 1980, the Center for Community Self Help was founded with its focus on serving the very market that was now the beneficiary of the new redlining laws. Soon after, Self-Help joined with Fannie Mae to establish a program for borrowers who were underserved by banks in the primary market. With this new secondary market underway, it was Self-Help that collected all of the information from Fannie Mae’s borrowers, tracked their loans, and produced analysis that was then used to put pressure on the larger banks to issue more loans to underserved communities. As Deborah Momsen-Hudson, Vice President & Director of Secondary Marketing, put it, “We’re an R&D lab for the financial industry.”
In direct response to the research produced by Self-Help and Fannie Mae, the CRA laws were subsequently expanded in 1995 to establish quotas for issuing mortgages to residents of underserved communities and to levy fines against lenders that did not meet those quotas. The new laws also required institutions to offer ATMs and local branch services in areas that were previously considered low usage, high risk areas for crime.
Stein is expected to be appointed to the proposed Consumer Financial Protection Agency. But as the John Locke Foundation’s Jon Ham puts it, Stein’s record shows he’ll do anything but protect the consumer.
If there is any doubt in your mind about the CRL’s role in shaking down banks to provide risky loans, and the line that runs from it to the corrupt Fannie Mae, read this from Stein’s testimony in 2008 to Sen. Dodd’s Committee on Banking, Housing and Urban Affairs (my emphasis): “Self-Help’s lending record includes our secondary market program, which encourages other lenders to make sustainable loans to borrowers with blemished credit. Self-Help buys these loans from banks, holds on to the credit risk, and resells them to Fannie Mae.”
Basically, they would buy the loan from the banks, encouraging the banks to make such loans. Then the loan would be kicked up to Fannie Mae. And we all know how that turned out.