Greenspan Tours South-Central

After a stroll through South-Central Los Angeles that he called “an eye-opener,” Federal Reserve Board Chairman Alan Greenspan told a gathering of bankers and community activists Monday that curing the economic ills of the inner city requires not more credit or government help, but capital investments that will spur lasting development.

Speaking at a community reinvestment forum in South-Central following a tour of one of its riot-scarred sections, Greenspan said that access to credit, in fact, has risen sharply in lower income areas in recent years. He cautioned against expanding credit availability, saying that delinquency problems have surfaced and that more credit is not entirely a good thing for lower income areas.

Although Greenspan did not offer specific proposals on how to encourage investments in the inner city, he said the answer does not lie in government.

“I am very dubious of all sorts of government subsidies,” he said to more than 300 people, including other banking regulators and members of Congress, who filled a packed auditorium at the Museum of Science and Industry. The forum was organized by Rep. Maxine Waters (D-Los Angeles), a House Banking Committee member who has long been critical of the dearth of branches and loans made to her South-Central district and other inner cities.

As Fed chairman, Greenspan controls the nation’s money supply and has enormous influence in financial affairs, including rules that govern bank lending practices. But he has rarely commented publicly on community reinvestment.

Greenspan, 71, had never made a visit to the streets of South-Central, and his appearance at 8 a.m. on the corner of Vermont and Manchester was an extraordinary scene. With a swarm of reporters and smartly dressed people following him, Greenspan covered three blocks, two of which were fenced-off vacant lots strewn with weeds and garbage, vestiges of the 1992 riots.

His hands in the pockets of his black, pinstriped suit and his lips pursed, Greenspan passed by Kim’s Family Shoes and a row of closed-down shops as well as two dozen day laborers, who laughed at the scene as they chased down cars for a day’s work. At the end of the 30-minute walk, Greenspan stopped and commented to reporters: “We regulators are swamped with all sorts of data, which we pore through day after day. I think it’s terribly important to look at what is under the data. It’s important to put a face on the numbers.”

He then headed for a breakfast with California’s bankers and community groups and business owners.

At the hearing, Greenspan generated warm applause. But his remarks were not universally popular. Rep. Barney Frank, a Massachusetts Democrat, took issue with Greenspan when the Fed chairman said government subsidies would provide only short-term fixes to inner cities. In a retort that drew heavy applause from the audience, Frank wanted to know why the U.S. was helping bail out Asia while its own inner cities are struggling.

Greenspan defended the nation’s efforts abroad, saying that it is in the interest of Americans. Greenspan then added: “I’m not saying I’m against using public funds when it’s appropriate and effective. I’m against the illusion of policy that depends too much on public funds and that fails.”

Waters and other community activists also called on Greenspan and other regulators to expand the Community Reinvestment Act, the 20-year-old law aimed at discouraging redlining and promoting lending in low-income areas. Recent changes to the CRA have enabled more meaningful evaluation of bank lending practices and have provided new information on small-business lending in lower-income areas. But many consumer advocates have sought an expansion of the CRA.

After giving his 15-minute testimony and answering questions, Greenspan left the forum at about 11:30 a.m., just as a heckler stood up and demanded to ask him a question. The heckler was escorted out after a 10-minute standoff.

Community bankers and activists testified afterward, followed by senior officials of Bank of America, Wells Fargo Bank and Washington Mutual--the state’s top three depository institutions, which have made multiyear pledges totaling $260 billion to lower income and minority communities. Nonetheless, Waters confronted Wells Fargo and BofA, asking why they have not been more active in South-Central. “A great deal of progress has been made in the last five years,” said Don Mullane, BofA’s executive vice president of corporate development.

Marva Smith Battle-Bey, head of the Vermont-Slauson Economic Development Corp., a South-Central group that has worked on housing and commercial developments, said she was skeptical that the growth in small-business lending in recent years has spilled over to the inner city. Nonetheless, she said she was encouraged by Greenspan’s visit.

“His presence means these issues will not go away,” said Darcy Robinson, a South-Central activist.