Redlining Law

In a remarkable demonstration of his continued allegiance to the powerful bank lobbies, President Bush is proposing legislation which will effectively “gut” the Community Reinvestment Act (CRA). The Bush Administration’s proposed legislation will remove over 80% of the nation’s banks from coverage of the act, which was passed to combat “redlining” of poorer communities.

Enacted in 1977, during the first year of President Carter’s Administration, the CRA provides that federally insured banks are required to serve the entire community where they are located, including low- and moderate-income neighborhoods. President Bush proposes to exclude from the act all small banks with a “satisfactory” rating and those large banks that have obtained an “outstanding” CRA rating from bank regulators.

Banks were required to have at least a “satisfactory” CRA rating in order to merge with other banks or to engage in interstate banking. In the last four years the CRA has been strengthened since the bank information that regulators use to rate the banks is now public, and community groups, such as the Los Angeles-based Communities for Accountable Reinvestment, led by Gilda Haas, have begun to press banks to serve low- and moderate-income communities.

The President maintains that the CRA creates too much paperwork. Yet this seems to be no more than an excuse to relieve banks of their legal and social responsibilities.

On the whole, the record of banks in providing capital to businesses in low-income neighborhoods is already poor. The CRA is one of the few tools available to see to it that the people who do business in low- and moderate-income neighborhoods are treated fairly.

President Bush’s renewed efforts to gut the CRA is a step in the wrong direction. It is especially disappointing since it comes after the civil unrest here in Los Angeles, and when he and most of the leadership of the nation are calling for a greater economic investment in low- and moderate-income communities.

RICK TUTTLE

Los Angeles Controller