How banks were bullied into making bad loans

'Community activists' used pressure tactics to secure high-risk mortgages

Posted: April 05, 2009
7:11 pm Eastern


WASHINGTON – Using tools provided by the federal Community Reinvestment Act, community organizers led by a self-described "banking terrorist" applied bullying tactics to secure high-risk mortgages and to shake down lending institutions for billions of dollars – actions that likely contributed to the "mortgage meltdown" that triggered the worst economic crisis since the Great Depression.

That's the substance of a new report by the Capital Research Center on the Neighborhood Assistance Corporation of America headed by Bruce Marks.


"Time and again, NACA has combined the street tactics of protest and demonstration with public policy tools such as the Community Reinvestment Act to pressure banks into expanding their operations in poor neighborhoods," says the report authored by David Hogberg. "NACA typically extracts self-serving concessions from banks, forcing them to provide it with funds that it then uses to make mortgage loans to low-income borrowers. NACA rolls the fees it earns servicing these loans back into its campaign of bullying banks."

In 2007, the year before the crash, NACA obtained $10 billion in bank commitments for its own loan commitments with what the group admits were aggressive, hounding intimidation tactics.

"NACA has been accused of being overly aggressive and personal," explains the group's website. "NACA wears this as a badge of honor, leaving no stone unturned and often hounding CEOs from their shareholder meetings to their homes. The rationale is simple: lenders have a personal and often devastating impact on the lives of the people who they refuse to provide affordable credit to or take advantage of through predatory loans and scams."


NACA earned that reputation by first targeting Fleet Financial Group of New England, which was accused of lending money to private mortgage companies that, in turn, lent money at "loan shark rates." NACA filed lawsuits against Fleet and worked with local media on disparaging news coverage. NACA's "shock troops," known for wearing yellow shirts, disrupted speeches by bank officials, including one by CEO Terrence Murray at the Harvard Business School.

Four days later, Murray met with Marks and agreed to settle all suits for $350 million.

According to Capital Research Center, that money was used to launch the next attacks on First Union Bank of North Carolina, headed by Edward Crutchfield, dubbed "Fast Eddie" by NACA.

NACA attempted to crash a shareholders meeting and then began invading Crutchfield's personal life.

Again, the NACA website explains: "NACA hounded Fast Eddie at every turn. Thousands of postcards were sent to his home and neighbors, informing them of First Union's practices. NACA drafted the 'Fast Eddie Report,' which contained Crutchfield's personal information, and sent it to all of his neighbors and the neighbors of First Union's directors and top officers. NACA wanted Crutchfield to understand that he had a personal impact on people's lives by denying them credit, and thus his personal life would be affected as well."

News was spread that Crutchfield was having an affair with a subordinate. NACA began sending protesters to the school his child attended.

Crutchfield and First Union soon settled for a $150 million payoff.

NACA has received similar payoffs from NationsBank, Bank of America and Citigroup.

In 2007, Countrywide Bank was targeted. It quickly acquiesced to demands for a settlement that included a stipulation to restructure its borrowed troubled loans. A year later, Countrywide was insolvent – touching off a string of bank defaults and government bailouts that have cost taxpayers trillions.

"NACA could not operate as it has without the Community Reinvestment Act," says the CRC report. "The CRA is a federal law, first enacted in 1977, that banned the real estate practice of 'redlining' communities, singling out geographical areas where a bank would make no loans. To comply with the CRA, banks had to show that they did not discriminate in making loans in poor and black neighborhoods."

That compliance got tougher in 1995 when President Clinton upped the ante, forcing banks to demonstrate statistically they were making their quota of loans in low-income neighborhoods and encouraging community activist groups like NACA to file complaints against banks.