Banking on All Our Citizens : Government must ensure that inner city has adequate financial services

Economic empowerment. That’s the key. Without it, residents of inner cities will continue to be at the mercy of those banks and financial service companies whose lending practices have long discriminated against African-Americans, Latinos and other minorities.

Time and again surveys have shown that minority applicants in the inner city have been denied credit much more frequently than white counterparts with similar incomes and credit backgrounds. In addition, many banks are abandoning minority neighborhoods. The result: a shameful pattern of redlining that adds to urban decay.

Despite some progress on political, social and employment fronts, minorities still face enormous obstacles when it comes to borrowing for homes or businesses, especially in riot-devastated neighborhoods. Last week, Southern California bankers toured riot areas--some for the first time--and were impressed by the rebuilding efforts there. The question remains: Will banks increase their lending?

Meanwhile, stepped-up efforts to wipe out the discriminatory practices must continue. More state, federal and city funds should be deposited at minority-owned banks.

Also, the federal government must move faster in responding to minority requests to establish lending institutions. For example, it has taken five years for the Black Employees Assn. to secure approval to open South-Central Los Angeles’ first federally chartered credit union, scheduled to go into operation this month. Clyde Johnson, the association president, did not give up even though the approval process took twice as long as that of most credit unions, and he hung in despite a mountain of federal regulation. The government seriously took up his request only a year ago--after the riots.

Efforts to start community-owned and -based banks and institutions like Johnson’s are urgently needed. Consider a preliminary report by the Los Angeles County Human Relations Commission concluding that major banks have pulled many branches out of African-American and Latino neighborhoods, leaving them with few financial services. The withdrawal of all but a handful of branches in these communities clears the way for check-cashing operations that charge high rates and for money-wiring scams.

The Clinton Administration, meanwhile, has sent a strong signal that it is cracking down on discriminatory lending by using undercover agents as “testers” to determine whether mortgage lenders are discriminating against applicants on the basis of ethnicity or race.

When all neighborhoods have strong financial institutions that help keep them economically vibrant, everybody wins--the residents of inner-city and minority areas as well as the community at large.