Clinton Calls for Low-Cost Accounts for Wage Earners

<x-flowed> American Banker online

Friday, January 14, 2000
Clinton Calls for Low-Cost Accounts for Wage Earners
By Dean Anason

NEW YORK - President Clinton on Thursday trumpeted plans for
government-designed, low-cost bank accounts as part of a tax break and
economic development package that will anchor the final budget proposal of
his presidency.
"Far too many families have no bank accounts at all," he said in a luncheon
speech on the second day of the Wall Street Project Conference hosted here
by Rev. Jesse L. Jackson's Rainbow/Push Coalition. "They wind up spending a
lot of their precious money on unnecessary fees" to cash checks and pay
bills.
The President provided little detail about the so-called "First Accounts"
except to say the administration would work with the financial services
industry to offer affordable services for low-income Americans, provide safe
access to money through more automated teller machines in underserved areas,
and deliver accompanying financial planning services.
An administration official said that the accounts would be strictly
voluntary for financial institutions and consumers. The President next month
will ask Congress for $30 million in fiscal year 2001 to fund a test program
for these accounts, the official said. They could resemble the accounts the
Treasury Department created last year for electronic payment of federal
benefits to people without bank accounts, but the First Accounts would be
aimed at a younger, more urban group of low-wage earners who do not receive
benefits payments and thus are not eligible for the existing
Treasury-designed accounts.
The official added that First Accounts, although still on the drawing board,
would function like checking accounts and would be separate from the
President's proposal for government-financed universal savings accounts, or
"USA Accounts."
In addition, President Clinton, trying to smooth over relations with
community groups, promised a renewed effort to promote the Community
Reinvestment Act.
He said he would hold a roundtable discussion with industry executives this
spring to foster corporate appreciation of the 1977 law that requires banks
and thrifts to make loans to creditworthy borrowers in all segments of their
markets.
"We had to work hard to ensure that when we passed the financial
modernization bill and expanded the powers and opportunities for banks, we
expanded the CRA as well and kept it instead of weakening it," said
President Clinton, who was introduced with high praise for his economic
policies by Citigroup co-chairman and co-chief executive Sanford I. Weill.
Wider use of the CRA combined with additional New Markets and Empowerment
Zone tax credits and other economic initiatives unveiled this week,
President Clinton said, would benefit many minorities who missed out on the
economic boom.
But activists are clearly still wounded by the President's signing of the
financial reform law in November. They disputed claims by the President and
other allies at the conference that the CRA was protected and, by some
accounts, expanded.
"Make no mistake about it, CRA was weakened," said John Taylor, president of
the National Community Reinvestment Coalition. He criticized the law for
widening the period between CRA exams for most small banks to at least four
years from the typical 18 months, and for imposing burdensome reporting
requirements on community groups.
Representatives from Citigroup, Bank of America Corp., and other financial
giants said they are ahead of schedule in satisfying their
multibillion-dollar community reinvestment commitments, but San Francisco
Mayor Willie Brown chastised them for making low-risk loans under the guise
of the CRA that "just don't get translated into dramatic improvements" for
inner cities.



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William Myers, Manager
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
(607) 273-3582 ext 817 fax (734) 448-6962 www.alternatives.org
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