ACORN: Enough is Enough

Congressional care for public funds should not require citizen outcry

By Gregory A. DiBella

ACORN, the Association of Community Organizations for Reform Now, has received about $53 million in federal funds since 1994. It should have been trusted with about $53 million less. The organization, which advocates for low- and moderate-income families by working on neighborhood safety, voter registration, health care, affordable housing, and other social issues, has recently become a media target in the wake of amateur videos revealing employees of the organization providing advice on how to launder money, hide illegal employees, and set up a prostitution business. Congress voted to deny the group additional funding on September 17.

Additionally, the Census Bureau now refuses ACORN’s help, and several state governors have banned companies from doing business with the organization. Such action is wise, if quite belated: a cursory examination of ACORN’s history will reveal that this advocacy group has been obviously corrupt for some time.

Eight national board members of ACORN were ousted in 2008, but not until last Friday did the Washington Post report on why this leadership change occurred. The officials in question transferred “several million dollars in charitable and government money”—money intended to assist the poor—to their own employees and affiliates. This is in addition to $1 million embezzled by the brother of ACORN’s founder as well as a similar amount in unpaid federal taxes. It has come to light that the organization’s leadership embezzled over half its budget, which it received in the form of tax dollars and charitable contributions, to pay those who were most in need—themselves, apparently.

One of ACORN’s priorities is voter registration, and its website advises the public that the “real ACORN” has a stringent policy to prevent voter fraud. As John Fund of the Wall Street Journal reminds us, however, Nevada polling officials this past May charged “ACORN, its regional director and its Las Vegas field director with submitting thousands of fraudulent voter registration forms last year.” Larry Lomax, the registrar of voters for Las Vegas, estimates that 48 percent of the organization’s registration forms are fraudulent. And the corruption isn’t confined to Nevada: employees in Washington and Pennsylvania were also convicted of voter registration fraud in 2007 and 2008. It’s possible that the “real ACORN” doesn’t commit registration fraud, but the ACORN with millions of taxpayer dollars does.

Apart from such examples of outright corruption, there is substantial evidence that ACORN’s strategy to increase access to affordable housing helped precipitate the housing crisis. While the organization sought to prevent predatory interest rates, its actions contributed to the liquidity spirals that in many cases have led to foreclosure.

According to UPenn’s Annenberg Public Policy Center, ACORN “has certainly applied pressure on banks to make loans to minority and low-income borrowers. … The mortgages that ACORN worked out with the banks did have lower underwriting standards than were customary. They allowed a higher percentage of a family’s income to go to debt repayment, and … were also more forgiving of past credit problems, providing loans to people who went through counseling on budget and credit issues.” The Annenberg Center goes on to note that in 1992, “First Nationwide Bank Vice President Neal Halleran told the Chicago Tribune: ‘Transaction by transaction, [loans from the ACORN program] would appear to be performing no worse than our portfolio overall.’”

Of course, in 1992, the housing market was significantly less liquidity-constrained, so a portfolio would not have suffered as a result of these loans to over-extended individuals. Unfortunately, those with bad credit who were granted loans as a result of ACORN’s pressure would have no recourse if their houses declined sharply in value. ACORN’s advocacy seems to have ignored the economic problems that befall banks that have to compensate for their now-greater credit risk.

Those with lower incomes, when unable to handle economic shocks to their household, default on a wide scale, and those defaults spell crisis. The economics of the matter dictate that ACORN’s well-intentioned efforts to secure affordable housing for low-income individuals would of necessity have contributed to the defaults in the mortgage market that underlie the financial problems we currently face.

While the original ideals of ACORN are arguably sound, the group’s leaders have strayed from them brazenly. When they have sought these ideas, their tactics have ignored the economic realities of monetary assistance. Even many of the more progressive members of the organization now realize that their errors have proven too grave.

ACORN 8, a splinter group of ex-ACORN affiliates seeking reform, wants the advocacy group “to live up to its original mission to give meaningful voice and empower low and moderate income members of society.” That said, given its rampant corruption and ill-advised strategies, there’s no reason to grant ACORN a second chance. Congress lost our trust as well as our money in its painfully slow realization that ACORN made one too many mistakes, and it should not waste more of the latter.