WSJ article CRA

[rhalsban at ncb.com]

This post transferred from the cdb-l mailing list

[carras at bellsouth.net]

I am not surprised by the WS Journal's view. It continues their pattern of
ultra right wing feverish histrionics and misleading and inaccurate
statements. What is more important is what this article portends: the
beginning of what I believe will be the most strident attack on CRA led by
Sen. Gramm. All of us...CRA advocates, community development organizations
and CDFIs must be ready to take on this battle to come. I urge each of you
to begin writing to your Congressional representatives and educate them
about the real story of the benefits of CRA. To the extent
possible...recruit bankers to sign on to these testimonies of the positive
impacts of CRA. Once the impeachment trial is over ...who knows
when.....look for gramm to make his move. We need to be ready.

James Carras

-----Original Message-----
From: rhalsban@ncb.com <rhalsban@ncb.com>
To: communitydevelopmentbanking-l@cornell.edu
<communitydevelopmentbanking-l@cornell.edu>
Date: Friday, January 08, 1999 10:14 AM
Subject: WSJ article re: CRA


>IAnyone care to respond to the following editorial:
>
>REVIEW & OUTLOOK (Editorial):
> Gramm's Glass-Steagall Beef
>
> The Wall Street Journal via Dow Jones
>
> Among the biggest pieces of business to come before this Congress
> will be bank
> reform, which means undoing the Glass-Steagall Act. This past fall,
> after
> thousands of lobbying hours were expended by those seeking a repeal,
> Phil Gramm
> of Texas quashed the whole project because he objected to just one
> part of the
> legislation called the Community Reinvestment Act. It is a shame the
> Glass-Steagall repeal didn't make it. But Senator Gramm's CRA concerns
> deserve
> attention. The issue here is drawing a line between doing good and
> subsidizing a
> protection racket.
>
> Back in the 1970s, Congress passed the Act with the aim of training
> banks to
> cease perceived racial discrimination in business and mortgage loans.
> CRA gave
> four different banking regulators -- the Fed, the Office of Thrift
> Supervision,
> the Federal Deposit Insurance Corporation and the Comptroller of the
> Currency --
> the job of reviewing lenders' performance in their communities.
>
> Often these offices didn't even do their auditing together, so
> bankers had to
> deal with up to four regulators making four sets of demands. Yet CRA's
> power was
> considerable: Any bank that wanted to merge with another, expand or
> open a
> branch had to get CRA approval. Banks were quick to discover that CRA
> packages
> that included handsome contributions to neighborhood nonprofits would
> win them a
> passing grade. Extra commitments by banks to establish quota programs
> for bank
> hiring also helped; so did set-asides for minority business.
>
> Let's postpone the theoretical debate over this sort of thing for a
> moment to
> just look at what the program has become. CRA very much looks as if it
> has
> evolved into a billion-dollar payoff scheme for regulatory approval.
>
> In 1993, Sumitomo Bank of California received a "need to improve"
> notice from
> the Federal Deposit Insurance Corporation. So it promised to issue
> $500 million
> in CRA-related loans over 10 years and spend 2% of net income on
> charities and
> nonprofits. It also said it would give 20% to 25% of contracts to
> minority-owned
> vendors. This is the way the world works now, cynics might say. But
> the numbers
> have risen beyond cynicism.
>
> This year, within a month of their April merger with Travelers
> Group, Citibank
> and Travelers announced in a press release a CRA commitment of $115
> billion, or
> double Citibank's domestic deposit base.
>
> When NationsBank and BankAmerica announced their mega-merger, they
> created a
> CRA package worth $350 billion over 10 years. A NationsBank press
> release
> pointed out that this amount "roughly equals the combined total of all
> community
> lending goals [commitments] made by the rest of the banking industry"
> since
> CRA's outset.
>
> The new NationsBank plan promises $115 billion to build or fund
> affordable
> housing, and $25 billion for economic investment. First African
> Methodist
> Episcopalian Church of Los Angeles sent its Tunua Thrash to testify at
> a July 9
> Fed hearing that she had "grave misgivings" about the effect of the
> giant merger
> on the church community. Soon after the merger went through,
> Nationsbank
> announced it was giving $300,000 in community development money to the
> Congress
> of National Black Churches.
>
> By now the activists have the banks trained to give at the drop of a
> hat -- or
> even before one. One of the most enthusiastic bits of pro-merger
> testimony at a
> 1998 Fed hearing over the union of Norwest and Wells Fargo came from
> ACCION New
> Mexico, which specializes in micro-loans. Anne Haines Yatskowitz of
> the group
> congratulated Wells Fargo for having made a $200,000 investment in
> ACCION's
> Albuquerque efforts the year before, even though, at the time, the
> bank didn't
> have much presence in Albuquerque. "There were no branches in
> Albuquerque," she
> went on to stress, "yet Wells Fargo took a very proactive role in
> supporting our
> program."
>
> Recently ACORN's Minneapolis representative, Marcia Erickson, used
> the
> occasion of a hearing on Norwest's merger with Wells Fargo to berate
> Norwest
> executives for their "racist, classist performance." ACORN
> representatives made
> similar charges, all this past year, at hearings on the merger of
> Nationsbank
> and BankAmerica, and First Chicago and Banc One.
>
> With the CRA's federal policeman there to interpret the rules and
> punish them
> for violations, bankers haven't been frank in public about CRA for
> years. As
> Harold F. Still, former president of the Pennsylvania Bankers
> Association, wrote
> to Senator Gramm: "Not long after passage I gave a speech on the
> subject to some
> 400-500 Pennsylvania bankers. In my naivete I spoke openly and
> frankly. Never
> having been a spell-binding speaker before, I was amazed when, after
> the speech,
> the entire audience rose and applauded." Yet, wrote Mr. Still, "never
> again did
> I speak publicly about the Act, nor did any other banker. The threat
> of action
> from the so-called community groups . . . caused all of us to keep our
> mouths
> shut."
>
> Even the Clinton Administration has had its run-in with the CRA
> Culture: When
> CRA fan Paul Sarbanes, Maryland's Democratic Senator, decided that the
> Administration's candidate for Comptroller of the Currency, John
> Hawke, wasn't
> enthusiastic enough about CRA, he blocked confirmation. The Treasury
> ended up
> slipping in Mr. Hawke with one of its famous recess appointments.
>
> If the political system is going to countenance this sort of
> shakedown, there
> ought to be something substantial to show for it. But even that's not
> clear. Fed
> Governor Edward Gramlich pointed out in a thoughtful speech recently
> that there
> is "very little rigorous evidence" on the long-term effects of CRA.
>
> Senator Gramm advocates treating CRA in a separate bill next time.
> As
> chairman-elect of the Banking Committee, he's now in a position to
> make that
> happen. It's time for a review.
>
> WSJviaNewsEDGE
> :PAGE: A22
> :SUBJECT: CONG FDIC OTS WSJ GS BANK CFIN MNYP USA
> Copyright (c) 1999 Dow Jones and Company, Inc.
> Received by NewsEDGE/LAN: 01/06/1999 11:47 PM
>
>
>
>



This post transferred from the cdb-l mailing list

[salpern at frdc.com]

To this end, can anyone suggest a good, recent article or two that sums up
CRA's achievements and includes good, solid stats on money lent in
different areas (geography and type of loan), # houses and housing units
that might be attributed to CRA, etc.?

At 10:42 AM 1/8/99 -0500, James Carras wrote:
>I am not surprised by the WS Journal's view. It continues their pattern of
>ultra right wing feverish histrionics and misleading and inaccurate
>statements. What is more important is what this article portends: the
>beginning of what I believe will be the most strident attack on CRA led by
>Sen. Gramm. All of us...CRA advocates, community development organizations
>and CDFIs must be ready to take on this battle to come. I urge each of you
>to begin writing to your Congressional representatives and educate them
>about the real story of the benefits of CRA. To the extent
>possible...recruit bankers to sign on to these testimonies of the positive
>impacts of CRA. Once the impeachment trial is over ...who knows
>when.....look for gramm to make his move. We need to be ready.
>
>James Carras
>
> -----Original Message-----
>From: rhalsban@ncb.com <rhalsban@ncb.com>
>To: communitydevelopmentbanking-l@cornell.edu
><communitydevelopmentbanking-l@cornell.edu>
>Date: Friday, January 08, 1999 10:14 AM
>Subject: WSJ article re: CRA
>
>
>>IAnyone care to respond to the following editorial:
>>
>>REVIEW & OUTLOOK (Editorial):
>> Gramm's Glass-Steagall Beef
>>
>> The Wall Street Journal via Dow Jones
>>
>> Among the biggest pieces of business to come before this Congress
>> will be bank
>> reform, which means undoing the Glass-Steagall Act. This past fall,
>> after
>> thousands of lobbying hours were expended by those seeking a repeal,
>> Phil Gramm
>> of Texas quashed the whole project because he objected to just one
>> part of the
>> legislation called the Community Reinvestment Act. It is a shame the
>> Glass-Steagall repeal didn't make it. But Senator Gramm's CRA concerns
>> deserve
>> attention. The issue here is drawing a line between doing good and
>> subsidizing a
>> protection racket.
>>
>> Back in the 1970s, Congress passed the Act with the aim of training
>> banks to
>> cease perceived racial discrimination in business and mortgage loans.
>> CRA gave
>> four different banking regulators -- the Fed, the Office of Thrift
>> Supervision,
>> the Federal Deposit Insurance Corporation and the Comptroller of the
>> Currency --
>> the job of reviewing lenders' performance in their communities.
>>
>> Often these offices didn't even do their auditing together, so
>> bankers had to
>> deal with up to four regulators making four sets of demands. Yet CRA's
>> power was
>> considerable: Any bank that wanted to merge with another, expand or
>> open a
>> branch had to get CRA approval. Banks were quick to discover that CRA
>> packages
>> that included handsome contributions to neighborhood nonprofits would
>> win them a
>> passing grade. Extra commitments by banks to establish quota programs
>> for bank
>> hiring also helped; so did set-asides for minority business.
>>
>> Let's postpone the theoretical debate over this sort of thing for a
>> moment to
>> just look at what the program has become. CRA very much looks as if it
>> has
>> evolved into a billion-dollar payoff scheme for regulatory approval.
>>
>> In 1993, Sumitomo Bank of California received a "need to improve"
>> notice from
>> the Federal Deposit Insurance Corporation. So it promised to issue
>> $500 million
>> in CRA-related loans over 10 years and spend 2% of net income on
>> charities and
>> nonprofits. It also said it would give 20% to 25% of contracts to
>> minority-owned
>> vendors. This is the way the world works now, cynics might say. But
>> the numbers
>> have risen beyond cynicism.
>>
>> This year, within a month of their April merger with Travelers
>> Group, Citibank
>> and Travelers announced in a press release a CRA commitment of $115
>> billion, or
>> double Citibank's domestic deposit base.
>>
>> When NationsBank and BankAmerica announced their mega-merger, they
>> created a
>> CRA package worth $350 billion over 10 years. A NationsBank press
>> release
>> pointed out that this amount "roughly equals the combined total of all
>> community
>> lending goals [commitments] made by the rest of the banking industry"
>> since
>> CRA's outset.
>>
>> The new NationsBank plan promises $115 billion to build or fund
>> affordable
>> housing, and $25 billion for economic investment. First African
>> Methodist
>> Episcopalian Church of Los Angeles sent its Tunua Thrash to testify at
>> a July 9
>> Fed hearing that she had "grave misgivings" about the effect of the
>> giant merger
>> on the church community. Soon after the merger went through,
>> Nationsbank
>> announced it was giving $300,000 in community development money to the
>> Congress
>> of National Black Churches.
>>
>> By now the activists have the banks trained to give at the drop of a
>> hat -- or
>> even before one. One of the most enthusiastic bits of pro-merger
>> testimony at a
>> 1998 Fed hearing over the union of Norwest and Wells Fargo came from
>> ACCION New
>> Mexico, which specializes in micro-loans. Anne Haines Yatskowitz of
>> the group
>> congratulated Wells Fargo for having made a $200,000 investment in
>> ACCION's
>> Albuquerque efforts the year before, even though, at the time, the
>> bank didn't
>> have much presence in Albuquerque. "There were no branches in
>> Albuquerque," she
>> went on to stress, "yet Wells Fargo took a very proactive role in
>> supporting our
>> program."
>>
>> Recently ACORN's Minneapolis representative, Marcia Erickson, used
>> the
>> occasion of a hearing on Norwest's merger with Wells Fargo to berate
>> Norwest
>> executives for their "racist, classist performance." ACORN
>> representatives made
>> similar charges, all this past year, at hearings on the merger of
>> Nationsbank
>> and BankAmerica, and First Chicago and Banc One.
>>
>> With the CRA's federal policeman there to interpret the rules and
>> punish them
>> for violations, bankers haven't been frank in public about CRA for
>> years. As
>> Harold F. Still, former president of the Pennsylvania Bankers
>> Association, wrote
>> to Senator Gramm: "Not long after passage I gave a speech on the
>> subject to some
>> 400-500 Pennsylvania bankers. In my naivete I spoke openly and
>> frankly. Never
>> having been a spell-binding speaker before, I was amazed when, after
>> the speech,
>> the entire audience rose and applauded." Yet, wrote Mr. Still, "never
>> again did
>> I speak publicly about the Act, nor did any other banker. The threat
>> of action
>> from the so-called community groups . . . caused all of us to keep our
>> mouths
>> shut."
>>
>> Even the Clinton Administration has had its run-in with the CRA
>> Culture: When
>> CRA fan Paul Sarbanes, Maryland's Democratic Senator, decided that the
>> Administration's candidate for Comptroller of the Currency, John
>> Hawke, wasn't
>> enthusiastic enough about CRA, he blocked confirmation. The Treasury
>> ended up
>> slipping in Mr. Hawke with one of its famous recess appointments.
>>
>> If the political system is going to countenance this sort of
>> shakedown, there
>> ought to be something substantial to show for it. But even that's not
>> clear. Fed
>> Governor Edward Gramlich pointed out in a thoughtful speech recently
>> that there
>> is "very little rigorous evidence" on the long-term effects of CRA.
>>
>> Senator Gramm advocates treating CRA in a separate bill next time.
>> As
>> chairman-elect of the Banking Committee, he's now in a position to
>> make that
>> happen. It's time for a review.
>>
>> WSJviaNewsEDGE
>> :PAGE: A22
>> :SUBJECT: CONG FDIC OTS WSJ GS BANK CFIN MNYP USA
>> Copyright (c) 1999 Dow Jones and Company, Inc.
>> Received by NewsEDGE/LAN: 01/06/1999 11:47 PM
>>
>>
>>
>>
>


This post transferred from the cdb-l mailing list

[ryand at fhfb.gov]

While not spirited defenses of the CRA that also should be highlighted,
the following two Fed publications help define the benefits that CRA has
had over the last two decades. There are, of course, criticisms of the
CRA, but the WSJ always likes to hear from the Fed.


The Community Reinvestment Act and the Profitability of
Mortgage-Oriented Banks
Glenn Canner and Wayne Passmore (Board of Governors, 1997)

"CRA and Fair Lending Regulations: Resulting Trends in Mortgage
Lending," by Evanoff and Segal, in the Nov/ Dec 1996 Economic
Perspectives, a journal of the Fed in Chicago


> -----Original Message-----
> From: Shelley Alpern [SMTP:salpern@frdc.com]
> Sent: Friday, January 08, 1999 11:51 AM
> To: communitydevelopmentbanking-l@cornell.edu
> Subject: Re: WSJ article re: CRA
>
> To this end, can anyone suggest a good, recent article or two that
> sums up
> CRA's achievements and includes good, solid stats on money lent in
> different areas (geography and type of loan), # houses and housing
> units
> that might be attributed to CRA, etc.?
>
> At 10:42 AM 1/8/99 -0500, James Carras wrote:
> >I am not surprised by the WS Journal's view. It continues their
> pattern of
> >ultra right wing feverish histrionics and misleading and inaccurate
> >statements. What is more important is what this article portends:
> the
> >beginning of what I believe will be the most strident attack on CRA
> led by
> >Sen. Gramm. All of us...CRA advocates, community development
> organizations
> >and CDFIs must be ready to take on this battle to come. I urge each
> of you
> >to begin writing to your Congressional representatives and educate
> them
> >about the real story of the benefits of CRA. To the extent
> >possible...recruit bankers to sign on to these testimonies of the
> positive
> >impacts of CRA. Once the impeachment trial is over ...who knows
> >when.....look for gramm to make his move. We need to be ready.
> >
> >James Carras
> >
> > -----Original Message-----
> >From: rhalsban@ncb.com <rhalsban@ncb.com>
> >To: communitydevelopmentbanking-l@cornell.edu
> ><communitydevelopmentbanking-l@cornell.edu>
> >Date: Friday, January 08, 1999 10:14 AM
> >Subject: WSJ article re: CRA
> >
> >
> >>IAnyone care to respond to the following editorial:
> >>
> >>REVIEW & OUTLOOK (Editorial):
> >> Gramm's Glass-Steagall Beef
> >>
> >> The Wall Street Journal via Dow Jones
> >>
> >> Among the biggest pieces of business to come before this
> Congress
> >> will be bank
> >> reform, which means undoing the Glass-Steagall Act. This past
> fall,
> >> after
> >> thousands of lobbying hours were expended by those seeking a
> repeal,
> >> Phil Gramm
> >> of Texas quashed the whole project because he objected to just
> one
> >> part of the
> >> legislation called the Community Reinvestment Act. It is a
> shame the
> >> Glass-Steagall repeal didn't make it. But Senator Gramm's CRA
> concerns
> >> deserve
> >> attention. The issue here is drawing a line between doing good
> and
> >> subsidizing a
> >> protection racket.
> >>
> >> Back in the 1970s, Congress passed the Act with the aim of
> training
> >> banks to
> >> cease perceived racial discrimination in business and mortgage
> loans.
> >> CRA gave
> >> four different banking regulators -- the Fed, the Office of
> Thrift
> >> Supervision,
> >> the Federal Deposit Insurance Corporation and the Comptroller
> of the
> >> Currency --
> >> the job of reviewing lenders' performance in their communities.
> >>
> >> Often these offices didn't even do their auditing together,
> so
> >> bankers had to
> >> deal with up to four regulators making four sets of demands.
> Yet CRA's
> >> power was
> >> considerable: Any bank that wanted to merge with another,
> expand or
> >> open a
> >> branch had to get CRA approval. Banks were quick to discover
> that CRA
> >> packages
> >> that included handsome contributions to neighborhood nonprofits
> would
> >> win them a
> >> passing grade. Extra commitments by banks to establish quota
> programs
> >> for bank
> >> hiring also helped; so did set-asides for minority business.
> >>
> >> Let's postpone the theoretical debate over this sort of thing
> for a
> >> moment to
> >> just look at what the program has become. CRA very much looks
> as if it
> >> has
> >> evolved into a billion-dollar payoff scheme for regulatory
> approval.
> >>
> >> In 1993, Sumitomo Bank of California received a "need to
> improve"
> >> notice from
> >> the Federal Deposit Insurance Corporation. So it promised to
> issue
> >> $500 million
> >> in CRA-related loans over 10 years and spend 2% of net income
> on
> >> charities and
> >> nonprofits. It also said it would give 20% to 25% of contracts
> to
> >> minority-owned
> >> vendors. This is the way the world works now, cynics might say.
> But
> >> the numbers
> >> have risen beyond cynicism.
> >>
> >> This year, within a month of their April merger with
> Travelers
> >> Group, Citibank
> >> and Travelers announced in a press release a CRA commitment of
> $115
> >> billion, or
> >> double Citibank's domestic deposit base.
> >>
> >> When NationsBank and BankAmerica announced their mega-merger,
> they
> >> created a
> >> CRA package worth $350 billion over 10 years. A NationsBank
> press
> >> release
> >> pointed out that this amount "roughly equals the combined total
> of all
> >> community
> >> lending goals [commitments] made by the rest of the banking
> industry"
> >> since
> >> CRA's outset.
> >>
> >> The new NationsBank plan promises $115 billion to build or
> fund
> >> affordable
> >> housing, and $25 billion for economic investment. First African
> >> Methodist
> >> Episcopalian Church of Los Angeles sent its Tunua Thrash to
> testify at
> >> a July 9
> >> Fed hearing that she had "grave misgivings" about the effect of
> the
> >> giant merger
> >> on the church community. Soon after the merger went through,
> >> Nationsbank
> >> announced it was giving $300,000 in community development money
> to the
> >> Congress
> >> of National Black Churches.
> >>
> >> By now the activists have the banks trained to give at the
> drop of a
> >> hat -- or
> >> even before one. One of the most enthusiastic bits of
> pro-merger
> >> testimony at a
> >> 1998 Fed hearing over the union of Norwest and Wells Fargo came
> from
> >> ACCION New
> >> Mexico, which specializes in micro-loans. Anne Haines
> Yatskowitz of
> >> the group
> >> congratulated Wells Fargo for having made a $200,000 investment
> in
> >> ACCION's
> >> Albuquerque efforts the year before, even though, at the time,
> the
> >> bank didn't
> >> have much presence in Albuquerque. "There were no branches in
> >> Albuquerque," she
> >> went on to stress, "yet Wells Fargo took a very proactive role
> in
> >> supporting our
> >> program."
> >>
> >> Recently ACORN's Minneapolis representative, Marcia Erickson,
> used
> >> the
> >> occasion of a hearing on Norwest's merger with Wells Fargo to
> berate
> >> Norwest
> >> executives for their "racist, classist performance." ACORN
> >> representatives made
> >> similar charges, all this past year, at hearings on the merger
> of
> >> Nationsbank
> >> and BankAmerica, and First Chicago and Banc One.
> >>
> >> With the CRA's federal policeman there to interpret the rules
> and
> >> punish them
> >> for violations, bankers haven't been frank in public about CRA
> for
> >> years. As
> >> Harold F. Still, former president of the Pennsylvania Bankers
> >> Association, wrote
> >> to Senator Gramm: "Not long after passage I gave a speech on
> the
> >> subject to some
> >> 400-500 Pennsylvania bankers. In my naivete I spoke openly and
> >> frankly. Never
> >> having been a spell-binding speaker before, I was amazed when,
> after
> >> the speech,
> >> the entire audience rose and applauded." Yet, wrote Mr. Still,
> "never
> >> again did
> >> I speak publicly about the Act, nor did any other banker. The
> threat
> >> of action
> >> from the so-called community groups . . . caused all of us to
> keep our
> >> mouths
> >> shut."
> >>
> >> Even the Clinton Administration has had its run-in with the
> CRA
> >> Culture: When
> >> CRA fan Paul Sarbanes, Maryland's Democratic Senator, decided
> that the
> >> Administration's candidate for Comptroller of the Currency,
> John
> >> Hawke, wasn't
> >> enthusiastic enough about CRA, he blocked confirmation. The
> Treasury
> >> ended up
> >> slipping in Mr. Hawke with one of its famous recess
> appointments.
> >>
> >> If the political system is going to countenance this sort of
> >> shakedown, there
> >> ought to be something substantial to show for it. But even
> that's not
> >> clear. Fed
> >> Governor Edward Gramlich pointed out in a thoughtful speech
> recently
> >> that there
> >> is "very little rigorous evidence" on the long-term effects of
> CRA.
> >>
> >> Senator Gramm advocates treating CRA in a separate bill next
> time.
> >> As
> >> chairman-elect of the Banking Committee, he's now in a position
> to
> >> make that
> >> happen. It's time for a review.
> >>
> >> WSJviaNewsEDGE
> >> :PAGE: A22
> >> :SUBJECT: CONG FDIC OTS WSJ GS BANK CFIN MNYP USA
> >> Copyright (c) 1999 Dow Jones and Company, Inc.
> >> Received by NewsEDGE/LAN: 01/06/1999 11:47 PM
> >>
> >>
> >>
> >>
> >


This post transferred from the cdb-l mailing list

[dwohl at tso.cin.ix.net]

Douglas Major-Ryan pointed us to the following publication from the Fed's
Board of Governors: "The Community Reinvestment Act and the Profitability
of Mortgage-Oriented Banks Glenn Canner and Wayne Passmore (Board of
Governors, 1997)".

To follow up, I found it on line at:
http://www.bog.frb.fed.us/pubs/feds/1997/199707/199707abs.html

David Wohl
Sabino Community Development Resources
4505 N. Quartz Hill Drive
Tucson, AZ* 85750
Phone:* (520) 760-8976
Fax:* (520) 760-0548
dwohl@tso.cin.ix.net <mailto:dwohl@tso.cin.ix.net>



This post transferred from the cdb-l mailing list