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Protecting community reinvestment.

Earlier this year, in the spirit of the Civil Rights era, African-Americans mobilized and defeated an attempt by a conservative congressman to water down laws requiring the nation's savings and loan and banking industries to serve minority communities and low-income areas.

The object of the attack was the Community Reinvestment Act (CRA), an anti-redlining law. Before the law was passed in 1977, banks and savings and loan officers actually drew red lines on maps of minority and low-income communities to indicate those areas where mortgages would be refused and loans to residents and businesses restricted. The Act requires banks to disclose the number of loans they provide to minority and low- and moderate-income clients. The banks are rated on lending practices within their service areas. If a bank has a poor rating, its application to open new branches or acquire other banks can be denied.

Advocates say the law has established new relationships between many communities and their bankers. Chris Lewis, legislative director of the Association of Community Organizations for Reform Now (ACORN) says bank commitments for investments $7.5 billion to $10 billion have been secured. Maxine Waters (D-Calif.) whose Los Angeles district has benefited from such agreements, fought attempts to alter the law. "CRA is the only vehicle which requires banks to lend to low-income and minority communities," she says.

The Act is also championed by the Rev. Charles R. Stith, who six years ago formed the Boston-based Organization for a New Equality to focus on economic-justice issues. CRA is a critical element for economic growth, he says, because without capital, communities cannot thrive. Stith cites a U.S. Department of Commerce report indicating that the average net worth of a white family is $40,000, while that of a black family is $4,000. In addition, a 1989 Atlanta Journal and Constitution series showed enormous disparities in black and white loan-rejection ratios. Milwaukee ranked first with a black rejection rate of 24.2% and a white rate of 6.2%, followed by Pittsburgh, Cleveland, Chicago and Detroit.

Banks and their congressional advocates have long argued that CRA compliance puts a costly burden on small banks. By contrast, CRA officials say small banks are often the worst offenders.

Last May, Paul E. Kanjorski (D-Pa.) a member of the House Banking Committee, offered amendments to a White House banking proposal that would have exempted small banks--those with less than $100 million in assets--from the law's mandates. Small banks represent about 20% of the nation's 12,300 financial institutions, but advocates of the Act said the amendments would exempt 80% of U.S. banks.

CRA activists and groups like the National Community Reinvestment Network (also run by Stith) and ACORN read danger in the amendments and counterattacked. They organized community activists, jammed hearing rooms, besieged legislators with calls and staged sit-ins

Congress could not ignore this outpouring. Even though the main bill was designed to provide broader interstate branching capabilities and money for the bank insurance fund, many lawmakers said most constituent calls and letters dealt with CRA.

The upshot: A deal was reached among Bush administration officials and lawmakers on both sides of the aisle. Led by Waters, other consumer advocates including Barney Frank (D-Mass.) and Kweisi Mfume (D-Md.), excised all amendments to the bill.

For the African-American community, the win was crucial, Stith says. "The name of the game in America is not just about what you're able to buy, but what you're able to own."
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Author:Dumas, Kitty
Publication:Black Enterprise
Article Type:Column
Date:Dec 1, 1991
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