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.)