Greenlining Series: Radical group's legal heists

 

APRIL 12, 2010

By TORI RICHARDS

This series was produced by CalWatchdog and the Examiner. We will run additional parts during the coming week.

It’s been called a bunch of shakedown artists, a growing menace, and a cousin of ACORN, the disgraced, disbanding national activist group of community organizers, political operatives, and voter registration evangelists.

Whatever it is called, the Berkeley-based Greenlining Institute’s name isn’t one that most people would likely recognize, even though for 17 years it has been the leading self-appointed national policeman for diversity in bank lending practices, corporate hiring and public utility contracts.

The group was founded in 1993 by two veterans of the 1960s civil rights movement, Robert Gnaizda and John Gamboa, who recently retired from the organization.

Greenlining describes itself as “a national policy, organizing, and leadership institute working for racial and economic justice.” Its mission statement is to “empower communities of color and other disadvantaged groups through multi-ethnic economic and leadership development, civil rights, and anti-redlining activities.”

It has garnered clout with state and congressional lawmakers, federal regulators, and top bank executives across the country, even as a growing host of critics accused Greenlining of helping cause the mortgage industry meltdown.

Most recently, Greenlining officials have begun aiming their proven high-pressure intimidation tactics at the trillions of dollars in assets held by private foundations across America.

What started two decades ago as an organization to help minorities and low-income residents obtain bank loans morphed into a political intimidation machine that has infiltrated the sectors of public utilities, insurance, education, health care and charities.

Now a California congressman wants officials to take a look at how the group has done business and determine whether Greenlining, ACORN and others have used federal laws to engage in what he calls “legalized extortion.”

But Greenlining would probably be nowhere without the Community Reinvestment Act, a federal law passed in 1977 that mandates that banks lend in all communities where they accept deposits.

Officially, the law was aimed at stopping “redlining,” a practice in which bank executives were said to quietly draw red lines on maps to indicate minority communities in which they would not make loans.

The law also included public advocacy provisions that empowered activist groups to protest proposed bank mergers and acquisitions. Over the years, Greenlining has used those provisions to block numerous bank mergers or expansions and force alleged offenders to agree to direct funds to specified communities.

More recently, Greenlining has turned its resources to the philanthropic community. The effort gained headlines in 2007 when Greenlining got behind AB624, an initiative that would have required the state’s largest charities to publicize the ethnic makeup of their boards, as well as of the recipients of their grants and business contracts.

 The charities balked, but then agreed to put $30 million into Greenlining-approved communities in return for the withdrawal of AB624. A 2008 Wall Street Journal editorial reported that following the AB624 compromise, Greenlining shopped similar legislation in other states: “That shakedown worked so well that Greenlining is taking its race-gambit national,” the Journal said.

Bert Ely, a banking expert in Virginia who regularly testifies before Congress, isn’t afraid to use the term “shakedown.”

“When you cut through all the rhetoric, that’s what they do,” he said. “These groups have a right to intervene and effectively get bought off. It’s a crass process, but it’s a reality when you have highly regulated industries.”

A high-profile attorney who has battled Greenlining and who requested anonymity said: “It’s about power. Some people think Greenlining is about money. They’re not. Look at what they were founded on in the beginning and look at it now. You tell me where it’s the same.”

Regardless of Greenlining’s motive, Rep. Ed Royce, R-Fullerton., believes the organization has abused CRA. He is a member of the House Committee on Financial Services, and sits on its Capital Markets, Insurance and Government Sponsored Enterprises; Oversight and Investigations; and Financial Institutions and Consumer Credit, subcommittees.

“For years, ACORN and other radical activist organizations have abused CRA to benefit their cause.  As a result, our financial system and our economy have suffered dearly,” Royce said.

“Going forward it is imperative that Congress investigates the role CRA played in the erosion of lending standards over the years and the extent to which this law is being abused by activist organizations,” he said.

Tori Richards is CalWatchdog’s special projects reporter. Richards has worked for CBS News, Reuters, the New York Post and Bloomberg, and was a Pulitzer Prize nominee.

 Later in the week: Congress and the White House open the bank vaults to Greenlining.