Bank Changes and Redlining

The Senate and House will consider proposals in this session of Congress (by Sens. Richard C. Shelby and Connie Mack and Reps. Doug Bereuter and Bill McCollum) which would remove small- and medium-sized banks from the coverage of the Community Reinvestment Act (CRA). If successful, the net effect of these proposals would be to remove 80% of America’s banks from the coverage of legislation which was established to help combat “redlining,” the systematic denial of bank loans in specific geographic areas, usually low-income areas that often tend to be predominantly minority neighborhoods.

Ironically, the proposals come just as the Clinton Administration has released new regulations to revamp CRA using a more streamlined, “bank-friendly” examination process. The new regulations will provide small banks with abbreviated guidelines, subject to approval of federal bank regulations. Most banks welcome the new regulations as a positive step toward developing a simpler exam process which emphasizes results rather than paperwork. In return, the new regulations request banks provide additional information on specific lending patterns, such as data collection on where small business loans are being issued.

Although the new regulations do not go as far as some of us--those who support the anti-redlining effort--would like, it is a major step in the direction of being more effective in the effort to battle the institutionalized discrimination of those banks that discriminate in their lending practices.

Press reports indicate the proposals have support of the congressional Republican leadership and that of the powerful banking lobbies. However, these proposals deserve the opposition of the President and all who oppose the “redlining” of neighborhoods in Los Angeles and in other areas across America. This debate is not simply about arcane banking regulations; it is a debate about an important arena in the struggle over equal treatment for American business people whatever their ethnicity or culture, and also about the economic viability of low-income, largely minority, neighborhoods in Los Angeles and other cities.

RICK TUTTLE

City Controller, Los Angeles