Inner City Press: Coordinating Efforts Under the Community Reinvestment Act

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As bank and financial services mergers get ever larger, and as our “local” banks become minuscule parts of nationwide and global mega-institutions, it becomes clear that people in different communities and states and even nations should work together in demanding accountability, from the institutions and from government.

Inner City Press/Community on the Move, and especially its Inner City Public Interest Law Center, have begun to explicitly work with groups in other states, and, where applicable, to coordinate advocacy campaigns. This growth has been organic:

ICP’s first five Community Reinvestment Act advocacy campaigns focused on banks’ failure to lend fairly in the South Bronx and Upper Manhattan in New York City. Two banks agreed to open new branches; the five banks together committed over $100 million in new lending in these communities.

When ICP began to look at Chase Manhattan Bank, however, that Chase had a similarly deficient record in communities well beyond the Bronx became clear. We began to coordinate with groups in other states in seeking accountability.

In 1997, ICP coordinated a challenge to Bank One’s merger with First USA, with groups in Texas and Delaware (the Delaware Community Reinvestment Action Council, DCRAC). This campaign resulted in the Federal Reserve imposing conditions on its approval, noting unresolved fair lending questions about Bank One.

In 1998, ICP and its (then-new) Inner City Public Interest Law Center worked with these groups and others, including in New Mexico, in demanding close scrutiny of the NationsBank - BankAmerica, Bank One-First Chicago, Citicorp-Travelers and other mergers. Working with DCRAC, on Household International’s proposal to acquire Beneficial, which is based in Delaware, ICPILC won precedent-setting fair lending commitments, as it did later in 1998 on Charter One Bank's application to acquire a bank in New York.

In 1999, ICP won several more important precedents. One involved the investment bank Lehman Brothers, which sought to acquire the failing Delaware Savings Bank with scarcely a CRA plan in place, and while being active in underwriting the mortgage-backed securities of various subprime lenders, including Delta Funding, which was sued by NYS authorities for predatory lending. After ICP's and DCRAC's comments, the OTS encouraged Lehman Brothers to pledge $2.2 billion in low and moderate income lending, and to identify and avoid predatory lending practices, including in the loan pools Lehman does the underwriting for. Another joint ICP / DCRAC protest ended with GMAC pledging $6 billion in low and moderate income lending. ICP advocates for the appropriate application of CRA to Internet banks -- see ICP's Hot Issues page for more.

The Gramm-Leach-Bliley Act of 1999 chipped away at the CRA, but by no means repealed it. This Act slows the CRA examination cycle for banks with assets below $250 million to once every four or five years, and imposes new reporting requirements on community groups that seek to enforce the CRA, including by submitting comments to the bank regulatory agencies.

Because the regulators have so inflated the CRA grading system, the one pro-CRA provision of the Gramm - Leach - Bliley Act (requiring financial holding companies' banks to have "Satisfactory" or "Outstanding" CRA ratings) is of little practical effect. When a bank moves to acquire an insurance company, the only venue for public participation is before a state insurance regulator, under a fair housing / consumer compliance standard, rather than a CRA standard. For this, contact the Inner City Public Interest Law Center.

The mergers, and the institutions, are only getting bigger, more privacy-invading, more totalizing. There is a need for community, consumers’ and other groups to coordinate their efforts.

Feel free to contact ICP and the Inner City Public Interest Law Center. ICP is also a member of the nationwide coalition NCRC, which provides information to, and, where applicable, helps link together, its member groups. If you're north of the border, you might contact the Canadian Community Reinvestment Coalition.

Together, we can...

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