Self-Dealing Revenge from OCC & Treasury Targets the CRA

Greenville   Sometimes you wonder why former Goldman Sachs and banking executives flock to political jobs like running the Treasury Department or the Office of the Comptroller of the Currency, but then you realize the facts.  It’s about score-settling or figuring out how they and their buddies can make more money in banking now and in the future.  The backstory on the current push to rewrite the rules on the more than forty years of the Community Reinvestment Act or CRA that mandated fair banking and the end of redlining to force banks to invest in lower income and minority neighborhoods is full of just such conflicts of interest and self-dealing.

As the Treasury Department and the OCC propose to rewrite and dilute CRA rules the Wall Street Journal reports that the issue is messier. Steven Mnuchin was bottom fishing after he left Goldman Sachs as an investment banker and flirted with financing in Hollywood.  He had assembled a group to pay $1.5 billing to buy IndyMac from the FDIC after the highflying, lowballing mortgage chop shop suffered a run forcing the FDIC as the deposit insurer to take over.  Mnuchin hoped to paint lipstick on the pig, resell it or take it public for a killing with his buddies.  One of his buddies was Joseph Otting who he recruited to run OneWest, the name of the newly whitewashed bank.  This was all capitalism at the roulette wheel.  Mnuchin and Otting got an offer to sell to CIT Group for $3.4 billion that would allow the investors to turn a profit of over $3 billion in 2014 after only six years.

Cha-ching, here come the filthy rich, isn’t greed great.  Yes, until they realized there were rules and regulations in the new west of OneWest.  They still had a portfolio of the stinking mortgages that had given them the bank in a fire sale in the first place, meaning that they had CRA obligations.  Any time a sale of this kind happens over the 40-year period CRA as ACORN and any organization – or bank – worth its salt knows, that opens the window for Federal Reserve and other reviews of the banks lending practices.  More than just some bad mortgages were stinking up their California lending experience in their get-rich-quick scheme and several organizations including the California Reinvestment Coalition and the Greenlining group filed challenges to their lending record.  None of this is new.  Groups including ACORN and scores of others have followed the rules and negotiated agreements for bank lending that has now surpassed a trillion dollars in low income neighborhoods.

The new west robber baron wannabes, Mnuchin and Otting were offended that they were challenged.  They tried to buy the groups off, but the groups had clear demands.  Mnuchin and Otting were offended at the impunity of community groups thinking that they had the right to negotiate for loan equity in the community.  Eventually they pledged $5 billion in loans to the community, which was less than the demands, but miles more than they intended.

CRA has benefited millions of people who were able to buy homes.  Mnuchin and Otting had their feelings hurt and their entitlements challenged.  Now Mnuchin is Secretary of the Treasury and Otting is Comptroller of the Currency.  They vowed to get even, and their revenge will be diluting CRA and preventing millions from owning homes in the future because of the act’s guarantee of fair banking and procedures that assured it.

As President Trump would say, “sad!”


Making it Right with Brad Pitt in the Lower Nine

New Orleans     The Lower 9th Ward became iconic as part of the story of catastrophe, struggle, and recovery in New Orleans and around the world after Hurricane Katrina.  Now there are new candidates in more cities where climate and nature have combined to expose humanity at its rawest, weakest, and sometimes best.  Here, the L9 is in the news again, still in the shadows of Katrina, over issues with one of the most widely publicized of the rehabilitation projects, Brad Pitt’s Make it Right Foundation.

Pitt and his wife at the time, Angelina Jolie, had stepped up in the wake of the storm to use their star power to raise money to build new houses there after the storm.  For a while they had a house in the French Quarter and were seen here and there.  Pitt, an architectural aficionado, had commissioned famous architects, here and abroad, to design the homes, and more than one-hundred have been built.  In my book, The Battle for the Ninth Ward:  ACORN, the Rebuilding of New Orleans, and the Lessons of Disaster, I have some issues with Make It Right based largely on planting high-priced, subsidized houses in the L9, designed more as showpieces than structures that fit in with the vernacular of the area or were sustainable.  Nonetheless, I never questioned Pitt’s sincerity and in fact when pushed by ACORN, including our organizer Tanya Harris and ACORN leaders to do the project in the real heart of the L9, rather than the rapidly gentrifying Holy Cross area near the Mississippi River, he quickly agreed and lived up to his word.  Harris in recent years has worked for the Make It Right Foundation, which also says good things about it.

In recent days some Foundation homeowners sued the operation because of shoddy construction, water leaks, system failures, black mold, and an array of issues.  One of the local papers, the New Orleans Advocate, did an editorial recently calling on Pitt to Make It Right.  Now the Make It Right Foundation has sued the architect, John C. Williams, for $20 million for design flaws that caused these problems, alleging that Williams and his firm have known about the problems and failed to correct them.  Maybe there will be a trial, but likely they’ll settle, which might work for the homeowners, but will leave the citizens less informed than they might need to be about John Williams and his practice.  Based on our experience with Williams, I’m siding with Pitt and the foundation on this one.

Williams in my book was the classic case of a believer in the mantra that a crisis is an opportunity, mainly for someone like him to cash in.  ACORN would run into him like a car passing a vulture on the highway at one hearing and meeting after another.  With some skullduggery he unraveled a contract won by ACORN and our associates to be the planner for the 9th Ward recovery with false allegations and charges of conflicts of interest, after we beat him in the competition, so that he could in fact be both planner and architect in a full-bore conflict of interest.  Maybe he did some good work, and maybe he did some bad work, but he was a corner cutter, back-room-whisperer motivated by total self-interest rather than commitment to the community.  Brad Pitt versus John C. Williams is a no brainer:  Pitt at least wants to “make it right,” while Williams often has no idea of “what is right.”

Vanessa Gueringer, long time ACORN leader in the L9, chaired an event a local church there to discuss my book when it came out several years after Katrina.  John Williams showed up for a hot minute.  Shook a few hands and bought a book to see if his name was in it.  He got his money worth.  He was mentioned in the book.  I doubt that he liked what was said about him there any more than he is going to like having to defend his work in the Lower 9th Ward now that the houses he built are already crumbling around him.