Lack of South-Central Banks ‘Appalling’ : Finance: U.S. comptroller, touring the area on the eve of Community Reinvestment Act hearing, vows help.

Comptroller of the Currency Eugene A. Ludwig, who is among the nation’s most important banking regulators, said he was “appalled” at the scarcity of bank branches in South-Central Los Angeles and promised that the Clinton Administration will push for a mixture of incentives and enforcement measures to ensure the number increases.

In Los Angeles for today’s public hearing on the Community Reinvestment Act, the federal anti-redlining law, Ludwig said the departure of bank branches from the inner city has created a vacuum that has been filled by “predatory” check-cashing companies and home-equity scams.

Ludwig, whose agency oversees 3,700 nationally chartered banks, made the comments Tuesday while talking with South-Central community groups to hear firsthand the complaints about a scarcity of bank loans and other services.

He is a law school classmate and friend of President Clinton’s who says he is the “point man” in Clinton’s effort to put teeth into the CRA. Newer, tougher CRA regulations will be put in force early next year, Ludwig said, including the use of “testers” or undercover loan applicants to check for discrimination.

Banks that open inner-city branches will be rewarded with the right to sell insurance, a right that is now restricted to banks that open offices in towns with populations of no more than 5,000, he said in an interview during his tour. Those banks will also receive “better ratings when they are evaluated for permission to expand.”

Among the stops Ludwig made Tuesday was at a check-cashing shop on Broadway near Manchester, one of the scores that now provide some of the services once offered by departed banks. The stores typically charge commissions between 2% and 5%.

Ludwig also visited the 27th Street Bakery on South Central Avenue, where manager Gregory Spann said he was unable to get a bank loan to make earthquake safety improvements and buy new ovens--despite a 50-year history in the neighborhood.

A big part of the problem for Spann and other local businessmen is that the nearest bank branch is 3 1/2 miles away, said Juanita Tate, executive director of Concerned Citizens of South Central Los Angeles.

But Ludwig’s urgings come at a time when the industry on the whole is closing, not opening branches. Many observers say the industry is “overbanked” and is in the midst of a long-term consolidation that will see several hundred more branches close.

And even if banks open branches in South-Central, there is no guarantee that customers will come, community activists say. Banks will first have to learn how to win back low-income and minority customers.