NCRC ALERT - ACT NOW TO SAVE CRA

NCRC Alert: Community Reinvestment Act in Danger - Act Now to Oppose
Financial Modernization and anti-CRA Bills

Dear Friends of Community Reinvestment:

Small business, affordable housing, and economic development lending and
investing will slow down and decline if Congress enacts so-called financial
modernization legislation without major changes recommended by the National
Community Reinvestment Coalition (NCRC). Please use the talking points
below to start calling your Representatives and Senators to oppose both HR
10 and anti-CRA bills. The capitol hill switchboard number is (202)
224-3121.

Movement will be fast. Representative Jim Leach (R-IA), chairman of the
House Banking Committee, will move HR 10 out of his committee in February
or March. Senator Phil Gramm (R-TX), chairman of the Senate Banking
Committee, vows an even more accelerated schedule for financial
modernization legislation he is considering. He wants a bill on the Senate
floor by the beginning of March! Rep. Bill McCollum (R-FL) has introduced
anti-CRA bills.

The National Community Reinvestment Coalition (NCRC) is the nation's CRA
trade association of more than 680 community organization members. Please
call us on (202) 628-8866 if you have any questions. Also, please carbon
copy us in any letters you write on HR 10 or anti-CRA bills. Following the
talking points are two sample letters - one to Representative LaFalce
(D-NY) and Senator Paul Sarbanes (D-MD) that were sent by NCRC.


Talking Points on HR 10 and anti-CRA bills

… Financial modernization legislation such as HR 10 would allow banks,
insurance companies, and securities firms to own each other. Currently,
there are limits on cross-industry ownership. HR 10 would wipe out the
limits.

… HR 10 weakens CRA since it does not expand CRA-like obligations to
insurance companies, securities firms, mortgage companies, and other
financial entities allowed to affiliate with banks. Holding companies can
shift their assets from banks and thrifts to the CRA-exempt affiliates and
subsidiaries. Banks will have fewer resources with which to make home and
small business loans.

… HR 10 does expand CRA to wholesale financial institutions, that would be
a new type of investment banks which would not be federally-insured, and
could only accept deposits greater than $100,000. This is positive, but
remember that wholesale financial institutions are only one of the
financial companies that would be allowed to affiliate with banks under HR
10.

… Holding companies are now shifting bank products, as well as assets to
non-depository institutions. State Farm's 16,000 insurance sales offices
throughout the country will sell and originate loans on behalf of State
Farm's new thrift. The Office of Thrift Supervision claims that it does not
have the statutory authority to apply CRA beyond the headquarters office of
State Farm's thrift in Illinois. If financial modernization does not
expand CRA to cover the banking activities of mortgage companies and other
non-depository institutions, HR 10 will result in CRA covering a shrinking
amount of traditional banking activities.

… HR 10 would permit most mergers (under $40 billion in assets) between
banks and non-depository institutions to occur without an application
requirement to federal banking agencies. Federal banking agencies would be
unable to review the safety and soundness or CRA issues of these mergers.

… Enemies of CRA will propose various anti-CRA amendments and bills this
spring. One favorite is small bank exemptions. Exempting small banks from
CRA would eliminate community reinvestment requirements for most of the
banks in the country. This would result in a new round of capital and
credit flight from small towns and rural areas.

… Another anti-CRA amendment is safe harbors. Safe harbors exempt banks
with Satisfactory and Outstanding ratings from CRA reviews during the
merger application process. First of all, these ratings can be out-of-date
and up to two years old. Secondly, CRA reviews are critical in order to
ensure that community reinvestment performance is preserved after merging
banks experience tremendous institutional changes usually affecting several
cities and rural areas.

… Rep. Bill McCollum (R-FL) currently has two bills, HR 173 and 190, that
contain safe harbors and small bank exemptions. HR 190 would also seriously
weaken fair lending enforcement in the country by effectively preventing
the use of data and statistics during fair lending investigations and
litigation.

… Senator Phil Gramm (R-TX) will most likely propose a so called
anti-extortion bill or amendment to financial modernization legislation.
This bill would attempt to prevent community groups from receiving bank
funding in exchange for not protesting bank merger applications. The
occurrence of greenmail is very rare, and is renounced by NCRC's 680
community organizations. If community groups, CDCs, credit unions, or
intermediaries receive funding from a CRA agreement, the funding is
dedicated for homeownership counseling or some other service that helps
banks serve low- and moderate-income areas -- not for being silent or
supportive of a merger application. A so-called anti-extortion amendment
would interfere with the democratic right of citizens to express their
views to federal regulatory agencies.

… CRA has led to dramatic gains in reinvestment. In the last twenty years,
community organizations and banks have negotiated more than 360 agreements
totaling more than $1 trillion of loans and investments for minority and
working class neighborhoods. Most of these agreements were in the last five
years, or during the most profitable era of banking in the U.S. CRA loans
are profitable, and are now being sold on Wall Street. CRA is a win-win
for banks and neighborhoods.

… Home purchase lending has increased dramatically. Low- and
moderate-income borrowers received 28 percent of all home purchase loans in
1997 - up from 18 percent in 1990. Blacks and Hispanics received 14
percent of home mortgage loans - up from 10 percent in 1990.

… Add some data and information you have about local CRA success stories.
Share these with NCRC.

… Ask you Senator or Representative how they stand on the anti-CRA and fair
housing amendments and bills. Ask them if they will support pro-CRA and
pro-HMDA amendment to HR 10. Share the responses with NCRC.

… Please carbon copy NCRC on your letters to Senators and Representatives.


SAMPLE LETTER TO HOUSE - DEMOCRATS AND MODERATE REPUBLICANS

January 26, 1999

The Honorable John J. LaFalce
2310 Rayburn House Office Building
Washington, DC 20515

Dear Representative LaFalce:

On behalf of the National Community Reinvestment Coalition (NCRC), I am
urging you to oppose HR 10, the Financial Services Act of 1999, until it
contains strong provisions expanding the Community Reinvestment Act (CRA)
to all financial companies allowed to affiliate with banks. NCRC is the
nation's CRA trade association of more than 680 community reinvestment
organizations dedicated to revitalizing inner city neighborhoods and rural
areas. By weakening CRA, HR 10 threatens to slow down the dramatic
progress in lending and investing in working class and minority communities
of the last several years.

We understand that you intend to introduce a streamlined version of
financial modernization legislation that would be focused on repealing the
Glass-Steagall Act's limitations on cross-industry ownership among banks,
insurance companies, and securities firms. NCRC could not support your
bill as an alternative to HR 10 unless it expands community reinvestment
requirements to all companies allowed to affiliate with banks.

This past November, the electorate supported candidates who believe that
equal access to capital and credit are important democratic principles.
Conversely, the electorate offered little support for further consolidation
among financial institutions. The new version of HR 10 introduced by
Chairman Leach does not reflect the consensus for economic justice. NCRC
is pleased that the Chairman expanded CRA to wholesale financial
institutions in his bill. In other critical respects, however, the new
version of HR 10 is a retreat from the community protections passed by the
House last year. It does not require banks to offer low-cost checking
accounts in return for permission to merge with securities and insurance
firms. It also removes sanctions for poor CRA performance of banks. Last
year's House version of HR 10 would have required a financial holding
company to divest a bank if it failed a CRA exam.

By not expanding CRA-like obligations to all financial companies allowed to
affiliate with banks, HR 10 will slow the progress in community
reinvestment. After HR 10 is enacted, financial holding companies would be
able to shift assets from CRA-covered banks to mortgage companies,
insurance companies, securities firms, and other institutions exempt from
CRA. As a result, banks will be left with fewer resources with which to
make affordable housing, economic development, and small business loans.

Holding companies are now shifting bank products, as well as their assets,
to their non-depository affiliates. For example, State Farm will use its
16,000 insurance agents throughout the country to market and originate
loans on behalf of its new thrift. The Office of Thrift Supervision
claims that it does not have the statutory authority to apply CRA beyond
the headquarters office of State Farm's thrift in Illinois. If a financial
modernization bill does not extend CRA to the lending and bank services
activities of mortgage companies and other non-depository affiliates, CRA
will cover an ever shrinking amount of traditional banking products and
services.

HR 10 could serve low-income consumers if, in addition to expanding CRA, it
improved upon data disclosure requirements. Insurance companies,
especially those affiliating with banks, should be required to report data
on policies issued by income and race of policyholders. Similarly, the new
CRA small business data should include the race and gender of the borrower
as well as the neighborhood in which the business is located. Data
disclosure helps leverage reinvestment by making financial institutions
publicly accountable to serve all borrowers in a fair and equitable manner.


In the last few years, community reinvestment has reached millions of
Americans. NCRC has calculated that banks and community groups have
negotiated more than $1 trillion of loans and investments in 360 CRA
agreements since the inception of CRA in 1977. These agreements have led
to increased access to the American dream of homeownership. In 1997, low-
and moderate-income households received 28 percent of all home mortgage
loans -- a substantial hike from 18 percent in 1990. Likewise, Blacks and
Hispanics received 14 percent of all mortgage loans made in the country in
1997, up from 10 percent in 1990. It would be detrimental to the wealth
building efforts in this country to pass a financial modernization bill
that would halt community reinvestment progress by failing to keep CRA on
pace with the evolution in the financial industry.

NCRC also believes that HR 10 endangers the safety and soundness in the
banking industry. It would allow unlimited affiliations among banks and
other financial firms, abandoning the incremental approach of the last
forty years of gradually allowing more cross-industry affiliations and then
evaluating the impacts on safety and soundness. It would allow banks to
merge with non-depository institutions without even requiring a merger
application to federal banking agencies if the resulting institution is
under $40 billion in assets. Federal agencies would then not be able to
review the CRA or safety and soundness issues associated with most of the
cross-industry mergers in this country. Hasty lawmaking resulted in the
S&L debacle costing U.S. taxpayers hundreds of billions of dollars. HR 10
ignores the bankruptcies abroad due to deregulation, and poses new dangers
to the most profitable financial industry in the world.

Enclosed, please find NCRC's recommendations for community-friendly
amendments to HR 10. NCRC agrees with you that enforcement of CRA should
be increased -- not lessened -- and enthusiastically supports the bill you
introduced last year requiring federal banking agencies to monitor and
enforce CRA agreements.

We also urge you to fight vigorously any efforts to weaken CRA as it
currently applies to banks. Representative Bill McCollum (R-FL) has
introduced HR 173 and HR 190 that include small bank exemptions and safe
harbor provisions. Small bank exemptions would eliminate CRA requirements
for small banks, and would be especially harmful to small towns and rural
areas that depend upon these banks for home and small business loans. Small
banks themselves have found the new CRA exams to be streamlined and
non-burdensome as reported by the enclosed article from the American
Banker. Safe harbor provisions would eliminate CRA reviews as part of the
merger application process for banks with Satisfactory and Outstanding
ratings. However, CRA reviews during the merger application process are
critical in order to ensure that lenders can preserve CRA performance after
enormous institutional changes usually affecting several cities and rural
areas in the country. Finally, HR 190 would seriously weaken fair lending
enforcement in the country by effectively preventing the use of data and
statistics during fair lending investigations and litigation.

Please contact us to let us know your position on the anti-CRA bills and/or
amendments, and to let us know that you will fight to propose pro-CRA and
HMDA provisions for financial modernization legislation. NCRC's 680 member
community organizations look forward to working with you to expand CRA and
build on the national consensus for economic justice.


Sincerely,
John Taylor
President and CEO


SAMPLE LETTER TO SENATE - DEMOCRATS AND MODERATE REPUBLICANS

January 26, 1999

The Honorable Paul Sarbanes
309 Senate Hart Office Building
Washington DC 20510

Dear Senator Sarbanes:

On behalf of the National Community Reinvestment Coalition (NCRC), I am
urging you to oppose financial modernization legislation unless such
legislation contains strong provisions expanding the Community Reinvestment
Act (CRA) to all financial companies allowed to affiliate with banks. NCRC
is the nation's CRA trade association of more than 680 community
reinvestment organizations dedicated to revitalizing inner city
neighborhoods and rural areas. By weakening CRA, the current versions of
financial modernization threaten to slow down the dramatic progress in
lending and investing in working class and minority communities of the last
several years.

This past November, the electorate supported candidates who believe that
equal access to capital and credit are important democratic principles.
Conversely, the electorate offered little support for further consolidation
among financial institutions. CRA provides opportunities for minority and
working class Americans to accumulate wealth through homeownership or by
owning small businesses. We expect that Senator Phil Gramm and other
conservative Republican Senators will attempt to gut the existing CRA law
and regulation either through new financial modernization legislation or
through stand-alone bills amending CRA. Any bill eviscerating CRA flies in
the face of the national consensus for economic justice and will eliminate
the only means millions of Americans have for reaching their dreams of
economic prosperity.

The various versions of financial modernization that have been introduced
and contemplated do not directly attack CRA but will eventually undermine
the law by preventing CRA from evolving with the rapid changes in the
financial industry. If any of the current versions of financial
modernization are enacted, holding companies would be able to shift assets
from CRA-covered banks to mortgage companies, insurance companies, and
securities firms, and other institutions exempt from CRA-like requirements.
As a result, banks will be left with fewer resources with which to make
affordable housing, economic development, and small business loans.

Holding companies are now shifting bank products, as well as their assets,
to their non-depository affiliates. For example, State Farm will use its
16,000 insurance agents throughout the country to market and originate
loans on behalf of its new thrift. The Office of Thrift Supervision claims
that it does not have the statutory authority to apply CRA beyond the
headquarters office of State Farm's thrift in Illinois. If a financial
modernization bill does not extend CRA to the lending and bank services
activities of mortgage companies and other non-depository affiliates, CRA
will cover an ever shrinking amount of traditional banking products and
services.

Financial modernization legislation could serve low-income consumers if, in
addition to expanding community reinvestment obligations, it improved upon
data disclosure requirements. Insurance companies, especially those
affiliating with banks, should be required to report data on policies
issued by income and race of policyholders. Similarly, the new CRA small
business data should include the race and gender of the borrower as well as
the neighborhood in which the business is located. Data disclosure helps
leverage reinvestment by making financial institutions publicly accountable
to serve all borrowers in a fair and equitable manner.

In the last few years, community reinvestment has reached millions of
Americans. NCRC has calculated that banks and community groups have
negotiated more than $1 trillion of loans and investments in 360 CRA
agreements since the inception of CRA in 1977. These agreements have led
to increased access to the American dream of homeownership. In 1997, low-
and moderate-income households received 28 percent of all home mortgage
loans -- a substantial hike from 18 percent in 1990. Likewise, Blacks and
Hispanics received 14 percent of all mortgage loans made in the country in
1997, up from 10 percent in 1990. It would be detrimental to the wealth
building efforts in this country to pass a financial modernization bill
that would halt community reinvestment progress by failing to keep CRA on
pace with the evolution in the financial industry.

NCRC also believes that current versions of financial modernization
legislation endanger the safety and soundness in the banking industry. They
would allow unlimited affiliations among banks and other financial firms,
abandoning the incremental approach of the last forty years of gradually
allowing more cross-industry affiliations and then evaluating the impacts
on safety and soundness. Most versions of financial modernization
legislation would allow banks to merge with non-depository institutions
without even requiring a merger application to federal banking agencies if
the resulting institution is under $40 billion in assets. Federal agencies
would then not be able to review the CRA or safety and soundness issues
associated with most of the cross-industry mergers in this country. Hasty
lawmaking resulted in the S&L debacle costing U.S. taxpayers hundreds of
billions of dollars. The current financial modernization bills ignore the
bankruptcies abroad due to deregulation, and poses new dangers to the most
profitable financial industry in the world.

Finally, NCRC urges you to fight attempts to directly attack CRA.
Specifically, foes of CRA will introduce safe harbors, small bank
exemption, and so-called anti-greenmail bills or amendments. Safe harbors
exempt banks from CRA reviews during the merger application process if
their subsidiaries have Satisfactory and Outstanding ratings. But CRA
reviews are critical in order to ensure that lenders involved in mergers
can preserve their CRA performance after enormous institutional changes
usually affecting several cities and rural areas in the country. Small
bank exemptions are extremely harmful because they eliminate community
reinvestment requirements for most of the banks in the country. Small
towns and rural areas that depend on these banks for home and small
business lending would suffer a new round of credit and capital flight.

So-called anti-greenmailing amendments attempt to prevent community groups
from receiving bank funding in exchange for not protesting bank merger
applications. The occurrence of greenmail, however, is extraordinarily
rare, and is renounced by the 680 community organization members of NCRC.
If community groups receive funding from a CRA agreement, the funding is
dedicated for homeownership counseling or some other service that helps
banks serve low- and moderate-income areas -- not for being silent or
supportive of a merger application. Moreover, an anti-greenmail amendment
would be very difficult to administer and would interfere with the
democratic right of citizens to express their views to federal regulatory
agencies.

NCRC's recommendations regarding community reinvestment provisions for HR
10 and any other financial modernization bill are attached. Please contact
us to let us know your position on the anti-CRA bills and amendments, and
to let us know that you will fight to propose pro-CRA and HMDA provisions
for financial modernization legislation. NCRC's 680 member community
organizations look forward to working with you to expand CRA and build on
the national consensus for economic justice.

Sincerely,
John Taylor
President and CEO








This post transferred from the cdb-l mailing list