Inner City Press Community Reinvestment Reporter

Inner City Press Community Reinvestment Reporter

July 17 - September 25, 2000 (Archive #4 of 2000)

September 25, 2000

Let's review: Citigroup announces a deal to buy the biggest publicly-traded subprime lender in the United States, and directs its law firm to rack up the stray regulatory approvals it will need. What used to be the main forum for community groups, the Federal Reserve, claims it will have no role this time. Last year's Gramm-Leach-Bliley Act allows acquisitions like this to proceed, with only "post-consummation" notice. So community groups plead with the two, lower-profile regulators who will review parts of the deal: Comptroller of the Currency John Hawke, and FDIC chairman Donna Tanoue. The FDIC claims initially not to be aware of the applications. The clock is running on the 20-day comment period, and Citigroup says it's not easy, to fulfill community groups' request for copies of the applications. Citigroup announces a lending commitment for the Washington, DC area with Freddie Mac, and prepares other announcements: but nothing about cleaning up its subprime lending practices, much less those of the scandal-plagued "hard" lender it's buying. The deal will close by year-end, Citigroup says. This is the new landscape, after the Democrats compromise on, and President Clinton signed, the Gramm-Leach-Bliley Act, a/k/a the Financial Modernization Act of 1999.

In Washington on September 18, Fed chairman Alan Greenspan spoke before a meeting of the American Bankers Association. The bankers laughed as Mr. Greenspan regaled them with stories of banks a hundred years ago hiring Pinkerton guards (famous for brutalizing striking workers -- very cute). Then Greenspan revealed his distaste for bank regulation: "private counterparty supervision remains the first line of regulatory defense." A moment later, he added, "private market discipline, the still most effective form of regulation." This perhaps explains the Federal Reserve's lack of substantive action on predatory lending. Residents of redlined communities are... "private counterparties" to the predatory lenders who impose scarcely-disclosed terms like pre-payment penalties, single premium credit insurance, and balloon payments so large they lead, inevitably, to a quick "flip" of the loan, with the attendant addition of points and fees to the principal owed. Who is being "discipline[d]" in these transactions, the specifics of which are quickly obliterated by securitization by Salomon Smith Barney and others? Not the lenders. It is the borrowers who are being disciplined, not unlike the "structural adjustment" regimes suggested for and imposed on Third World nations by the IMF and World Bank. Mr. Greenspan's ode to market discipline included a plug for the deregulation law: "The Financial Modernization Act is only a flag on the way to future changes. It is a piece of legislation that will bring major changes for the good, I trust, in all respects." Among these "goods," apparently, is the lack of a Federal Reserve Board comment period on Citigroup-Associates...

Senator Gramm spoke to the ABA the following day, and was more open, and less scholarly, about his opposition to any curbs on predatory lending. "Predatory lending is a good political term," Gramm said, adding "if we're not very careful, in the name of predatory lending we could end up denying people of moderate- or limited income access to capital... I am very concerned about denying access to credit." Perhaps that's why Gramm has sought, and may again seek, to repeal the Community Reinvestment Act?

When he ran for the Republican nomination for president (very brief, it was, in 1996), Gramm routinely related every policy proposal back to what his mother had (supposedly) told him. Predatory lending's no different now: according to BNA, Gramm told the assembled bankers that "his own mother bought his childhood home with a high-cost loan." Perhaps it was Commercial Credit, now Citifinancial, which traces its history back to 1918. Or The Associates, which has a similar history. Gramm said "premiums on loans are a general indication" of people's credit worthiness. Perhaps Gramm hasn't seen the GSE studies finding that many subprime loans are, upon later analysis, made to prime quality borrowers. What was wrong with Gramm's mother's credit history? We stand ready to advocate! No matter how many decades later! The implication is that, if consumer advocates has existed then as they do now, Phil might have had no place to sleep but a manger. Thus are myths born. The search for the loan documents begins!

In more serious news, the subprime lender Advanta is under investigation by the Securities and Exchange Commission, for misleading investors about its settlement with the OCC. The New York bank Roslyn is selling most of its (subprime) mortgage company, that got it sued for discrimination in 1997. The subprimer New Century is up for sale (Phil? If you like the business so much, here's an opening...); KeyCorp's laying off 2,300 employees, and Bank of America's been charged with corruption, by a borrower who alleges he was forced to invest in a B of A loan officer's side business in order to obtain B of A loans. As Mr. Greenspan said on September 18, "the Financial Modernization Act... will bring major changes for the good, I trust, in all respects." More next week.

September 11, 2000

One might have thought that the bank regulators' public hand-wringing about predatory lending -- from Alan Greenspan's widely-reported speech in March, through the HUD/Treasury Department "forums," and the Federal Reserve's recent round of hearings, which concluded September 7 in San Francisco -- was resulting in the major banks' distancing themselves from questionable subprime lenders. Some put this spin on First Union's decision to shut down The Money Store, and on Bank of America's more recent (and more quiet) decision to shut down NationsCredit. But the lack of effect of the regulators' expressions of concern was made clear last week, when Citigroup announced a deal to buy The Associates, one of the most scandal-plagued subprime lenders.

Citigroup made the announcement on September 6, and most of the financial press slapped together articles praising the deal-making acumen of Citigroup CEO Sandy Weill. Much of the coverage echoed a puff-piece on Weill that appeared in the New York Times Magazine of August 27, which profiled Sandy relaxing in his country home, reflecting on his relentless drive to the top, cutting out one rival after another (John Reed, Jaime Dimon, even, most recently, his own son, Marc Weill, fired earlier this year). The Times piece concluded with Sandy demanding credit for his philanthropy: he rebuilt Carnegie Hall, and has slapped his name on hospital wings (where doctors, not surprisingly, applaud him).

On a journalists' conference call about the deal, Weill was asked about the issue that might arise on this combination of subprime lenders. Weill was dismissive, saying that "[o]ur company has a very good long-term record of being a good corporate citizen by being supportive of all of our various regulatory constituencies and what they're trying to accomplish. I'm hopeful that they would think we're the kind of company that they want to continue to work with in a constructive way in the future."

Let's unpack and parse this. Travelers, prior to its merger with Citicorp in 1998, was built on a high-interest rate lender headquartered in Baltimore, Commercial Credit. The company was no paragon of corporate citizenship: HUD investigated it in 1997 for systemic Fair Housing Act violations, and the company acknowledged to the New York State Banking Department that it had been violating the Home Mortgage Disclosure Act. Perhaps Mr. Weill was referring to, and appropriating, the record of Citicorp. But Citicorp was hauled before Congress in the late 1990s for aiding in money laundering by the family of then-Mexican president Salinas, among other irregularities.

Weill's next phrase, "supportive of our various regulatory constituencies and what they're trying to accomplish" compresses current real politik corporate-speak. Regulators are changed with enforcing the laws, not "accomplishing" policy objectives. If Weill is referring to government agencies, he's implying that "it's all politics." For example, the Federal Reserve wanted the Glass-Steagall Act to be repealed, so Weill's merger with Citicorp was supporting of what the Fed was "trying to accomplish." Clinton and the New Democrats want to be seen as pro-business; natch.

If, on the other hand, Weill's referring more generally to "constituencies" -- that is, non-governmental groups who are viewed as promoting (or "trying to accomplish") various causes, the last part of his response is particularly interesting: these possible opponent of the deal should think twice, if they "want to continue to work with [Citigroup] in a constructive way in the future." The implication is clear; its effect on groups which might legitimately be expected to oppose the deal remains to be seen.

The deal also illuminates the ways in which the (Citigroup instigated, and sponsored) Gramm-Leach-Bliley Act of 1999 reduces scrutiny of, and public input into, mega-acquisitions such as this. Associates owns three banks, but each one under a different loophole, such that the Federal Reserve has not deemed Associates to be a bank holding company under its jurisdiction. Even so, pre-GLB, Citigroup would have had to apply to the Fed for approval of this "non-banking" acquisition. But the GLB allows banks' "non-banking" acquisition to take place without any application to the Fed. So in this case, the only applications will be to the OCC and FDIC, the regulators of Associates ("non-bank") banks. And these applications will not be explicitly covered by the Community Reinvestment Act, only the looser, even more pro-forma "Change in Bank Control Act."

When President Clinton signed the Gramm-Leach-Bliley Act in November, 1999, he claimed that it preserved and expanded the Community Reinvestment Act. Certain of Citigroup's and Weill's "constituencies" repeated the claim. Considering the new law's effect on this deal, the claim was and is dubious. The GLB served Citigroup by legitimating its unprecedented (and then-illegal) 1998 merger; now, the GLB serves Citigroup by allowing only an extremely streamlined review of its acquisition of one of the largest, and most problematic, subprime lenders in the United States…

September 5, 2000

Two seemingly-interconnected stories from last week deserve analysis. In the first, on August 30, the Chicago City Council passed a much-watered down "Anti-Predatory Lending Ordinance," which will prohibit companies which have affiliates engaged in predatory lending from doing business with the city, including bond underwriting business. Two bank holding companies which stand to be affected, Citigroup and Bank of America, lobbied strenuously against the ordinance, and managed to get many of its definitions and other provisions changed.

The second story appeared in the St. Petersburg (FL) Times of August 31: Bank of America has closed one of its subprime-lending units, NationsCredit. Bank of America never announced the closure -- this can be contrasted with First Union's quite public shut-down of The Money Store earlier this year. B of A consumer finance group spokeswoman Jerri Franz, when questioned, characterized the closure of NationsCredit as purely a financial decision: "When we looked at the investment it would take to get NationsCredit to reach its profit goals, we felt we could invest that money in other parts of the company and get a better return," she said. It should be noted that EquiCredit, which the then-NationsBank acquired along with Barrnett Banks, is substantially larger than NationsCredit. EquiCredit makes subprime loans nationwide, from 125 offices in 40 states. The Florida Times-Union in Jacksonville (where EquiCredit is headquartered) conducted a survey of local property records, and found EquiCredit loans with interest rates over 13%, and with "balloon payments at the end of 10 years that almost equaled in size to the original loan" -- which would appear to fall within the definition of predatory lending adopted by the Chicago City Council.

So will Bank of America, and Citigroup, continue to bid on bond underwriting and other business from the City of Chicago? And why, one wonders, did Citigroup escape the (slight, but at least detectable) scrutiny brought to bear on Bank of America last week?

One answer is that Citigroup reports Home Mortgage Disclosure Act data for its subprime lending under (at least) two dozen separate names. There are 24 iterations and variations on the name "Citifinancial" in the 1999 HMDA data base. This is a strategy that Travelers brought into the (then-illegal) merger with Citicorp in 1998. Travelers' subprime lending was done through a company generally named "Commercial Credit," but which had numerous different HMDA-reporting entities. There is a need for an aggregated review of all of Citigroup's involvements in questionable subprime lending, including its underwriting and pooling of such loans through Salomon Smith Barney. ICP is working on this, and will be reporting results on this site…

August 21, 2000

Vice President Al Gore, in his speech accepting the Democratic Party’s nomination for president on August 17, listed the industries he’s going to “fight,” on behalf of the American people: tobacco, HMOs, polluters. Noticeably absent was any mention of the banks, or even of predatory lenders. The Financial Services Roundtable’s Steve Bartlett, who attended both conventions, gushed afterwards that both parties appear favorably disposed toward the banking industry. This may not be surprising. Examples: Wells Fargo held a reception for lawmakers during the convention, as did Citigroup. Since January 1, 1999, Citi has given $574,000 to the Republican Congressional and Presidential candidates, and $705,000 to Democrats. Lionel Johnson, Citigroup's vice president and director of international government relations says that the “New Democrats” understand what’s needed, globally: “They have demonstrated that there is a strong element of the Democratic party that is pro-growth and committed to a new centrist direction for the party,'' Johnson said. Rep. Cal Dooley, D-Cal., one of three co- chairs of the so-called New Democrat Coalition, proudly told Bloomberg that he and other House New Democrats have met twice with Sandy Weill, Citigroup's chairman and CEO, at the company's headquarters.

Citigroup has been aiding several House Democrats who supported normal trading relations with China this year. Citigroup’s Johnson said that the company in May held a fundraiser in its Washington lobbying office to help one such lawmaker, Rep. Baron Hill, D-Indiana. In related news, Citigroup’s Salomon Smith Barney unit announced last week that it’s setting up a joint venture in China. In a parallel universe, in Los Angeles on August 17, Citigroup was presented with an award as “The World’s Most Destructive Bank,” on environmental, human and civil rights grounds -- including branch closing, redlining and predatory lending. For more, see ICP’s ongoing Citigroup page... Or, see this week's ICP poem, "L.A. Aug. 17: Drowned by the Hype."

From the surreal to the arcane: given the banking industry’s ability to avoid being put on even the Democratic Party’s scrutiny list, meaningful reform of the subprime lending industry remains doubtful. On August 16, the Federal Reserve held the third of its four hearings on the Home Equity and Ownership Protection Act of 1994, in Chicago. Fed Governor Gramlich focuses remains limited to consumer education: “Predatory lending would not exist, or would be relatively rare, if prospective borrowers understood the true nature of their loan contracts," as Gramlich put it in a recent speech. Sources in the Fed indicate that the most it will do is to lower the HOEPA “trigger” from 10 to 8 percentage points over Treasuries, and perhaps include prepayment penalties and credit insurance in the calculation of the fees and points trigger. The Fed is resistant to even the second of these two, minuscule changes. The Fed’s HOEPA hearings (the last is to be held in San Francisco on September 7) have been a (quite moderate) tempest in a tea pot...

August 14, 2000

The first major multi-state, multi-organization CRA challenge of 2000 began last week. Community groups in at least seven states filed comments opposing Wells Fargo & Co.’s application to acquire First Security. Virtually all of the comments touched on Wells’ subprime lending, and its under-service of low income communities of color with its normal interest rate loans. The groups, including ICP, have asked the Federal Reserve to hold a public hearing on Wells’ application. It’s worth noting that while the Fed held public meetings on five mergers in 1998, and one in 1999, it has yet to hold such a meeting in 2000. If not now, when? Particularly given the Fed’s chairman’s comments about the Fed’s commitment to look into issues raised about potentially abusive subprime lending?

Another, less high profile CRA commenting process that came to a head last week was on the Office of Thrift Supervision’s first CRA examination of insurer State Farm’s savings bank. When State Farm chartered this institution in 1998, organizations from New York, San Francisco, San Diego and Chicago all criticized State Farm’s plan to limit the bank’s CRA assessment area to Bloomington, Illinois. Eventually, State Farm acknowledged that it would have a CRA duty in Illinois, Missouri and Arizona, the three states in which it said the bank would begin to do business, through insurance agents.

The OTS conducted a CRA exam of State Farm Financial Services, FSB earlier this year -- and then realized that it had neglected to give notice of the exam, and solicit public comments. In mid-July, the OTS wrote to the five groups which had commented on the chartering of the bank back in 1998, and to which State Farm had sent copies of its letter acknowledging a CRA duty in three states. The OTS offered these groups, including ICP, the opportunity to comment on the bank’s CRA performance, for the exam, until August 12, 2000.

Several of the groups expressed frustration that there was (and is) very little to comment on, so far. State Farm FSB has yet to report any Home Mortgage Disclosure Act data; since it operates through insurance agents, and not branches, the FDIC’s data base does not break down State Farm FSB’s deposits by state, much less by city. It is clear, however, that State Farm FSB has expanded beyond its initial three states. The Las Vegas Sun of August 7, for example, reported that “State Farm Insurance Cos. has begun offering in Nevada checking and savings accounts, certificates of deposit, home equity credit lines and mortgage, car and home equity loans through the federally chartered State Farm Federal Savings Bank... By last week, some 72 of the company's 101 Nevada insurance agents had completed training that will help them explain the products the Internet bank offers. By the end of August, about 95 will have completed the two-day training, which was approved by the Office of Thrift Supervision.”

ICP has raised this to the OTS, asking what State Farm FSB’s CRA assessment area is, in light of this expansion. While State Farm’s distribution system (through its existing insurance agent network) is certainly innovative, how will the fairness of its penetration of low- and moderate-income communities be assessed? And what notice will the OTS provide, as the bank continues to expand? Already, State Farm is soliciting deposits nationwide, via the Internet. Issues surrounding the Fair Housing Act compliance of State Farm’s homeowners insurance offerings have yet to be resolved. Forgetting to even give public notice of the first CRA examination of this cutting-edge institution was hardly an auspicious beginning, to this new age of CRA assessment of Internet and other non-brick and mortar institutions. Nor is the OTS’ latest batch of CRA grades, which include not a single “Needs to Improve” or “Substantial Non-Compliance” rating. The OTS’ performance evaluation of State Farm FSB will be reported and analyzed in this space, once it is released.

We at ICP are often critical of the Federal Reserve’s enforcement of, and adherence to, the laws: the Fed’s approval of the Citicorp-Travelers merger in 1998 was the prime example of the Fed bending laws to promote its vision of mega-banks, or to placate two of the largest financial institutions. But last week, the Fed in at least one proceeding enforced the law as it is written, and dismissed the arguments of a top-ten bank holding company. If we criticize law bending and breaking, we must at least note the Fed’s law enforcement.

Street beat: a correspondent of the (cutting edge) Indy Media Center of Philadelphia ran into Gramm on the street. Here’s the account, from <www.phillyIMC.org>:

“During the most chaotic part of the day on Tuesday, I was walking not far from City Hall with Alex... when I spotted... Phil Gramm, Republican senator from Texas, heading right for us. ‘Hey Alex, that's Phil Gramm,’ I said. Alex was quick on his feet. ‘...The rich aren't going to have their way any more,’ said Alex. Gramm slowed down. ‘Bullshit,’ he replied (and I swear this is an exact quote). ‘The rich have always run everything, and they always will.’ What I would have given for a video camera.”

The story was picked up by the San Francisco Chronicle of August 3, with the profanity changed to “bulls---” and Gramm described as a “prominent GOP senator.” Not for long, perhaps, if current polls hold: Dow Jones’ Philadelphia correspondents reported last week that Gramm might be named Treasury Secretary, if Bush wins the presidency. Which wouldn’t bode well for CRA enforcement by the OCC and OTS (both Treasury Department units), but might make for a slightly more community-accountable Senate Banking Committee...

...the Fed reports that on First Union - CoreStates, “more than 200.. submitted comments, of which slightly less than half opposed of were critical of the acquisition.” NationsBank - BankAmerica generated 1,600 comments; “slightly less than one-half opposed this transaction, which most opponents from California.” Of Bank One - First Chicago, the Fed writes that “[a]pproximately 330 organizations and individuals submitted comments, approximately 45% of which opposed the proposal.” Of Travelers-Citicorp, the Fed states that “[a]pproximately 25% of the 425 organizations and individuals commenting on the proposal expressed some degree of protest or concern.” Finally (of the mega-mergers), of Norwest - Wells Fargo, the Fed writes that “[a]pproximately 59% of the nearly 150 total submissions from various community groups and individuals were protests or voices some degree of concern.” So we can make a chart:

# of %
Comments Opposing
First Union-CoreStates 200 45%
Travelers-Citicorp 425 25%
NationsBank-BankAmerica 1,600 45%
Bank One - First Chicago 330 45%
Norwest- Wells Fargo 150 59%

What does this mean? That Citigroup has the most support, of these banks, and Wells Fargo the least? Hardly. The Fed has included, in its reports on these applications, comments (most of them favorable to the banks) that had nothing to do with CRA. Travelers generated letters from symphonies, youth arts programs, hospitals and opera houses. Norwest, despite paying for pro-bank groups to travel to the public meeting in Minneapolis, apparently did not solicit such extraneous comments. But if the Fed’s going to count, and report to Congress, only the raw numbers -- why not?

The Fed provided ICP with the response it made to Sen. Gramm’s March 24, 2000 inquiry into the CRA investment test (Gramm’s letter is set forth in full in the archive to this Report). On May 1, Fed Chairman Greenspan transmitted to Sen. Gramm a Fed staff memorandum, a list of state member banks with less than satisfactory investment test ratings, and a list of applications involving CRA investment test issues.

The memorandum states that “[t]he Federal Reserve had ten cases between January 1, 1996, and March 15, 2000, where a protester raised concerns about an institution’s CRA investments.” Interestingly, the last of these cases was resolved on April 1, 1999 -- more than a year ago. In chronological order, the investment-challenged applicants were:

National City Corporation, Cleveland, Ohio
Morgan Guaranty Trust, New York, New York
Toronto-Dominion Bank, Toronto, Canada
AMCORE Financial, Rockford, Illinois
BanPonce Corporation, Hato Rey, Puerto Rico
Mercantile Bancorporation, St. Louis, Missouri
HUBCO, Mahwah, New Jersey
NationsBank, Charlotte, North Carolina
Sun Trust Banks, Atlanta, Georgia
Banco Santander, Madrid, Spain

The Fed’s memo to Sen. Gramm notes that BanPonce was a “ratings case; all other cases were protested cases...”. BanPonce’s application (to acquire Seminole National Bank of Sanford, Florida) was approved on a delegated basis, with no Board Order. All the rest of the cases resulted in a Board approval Order. So the case in which regulators themselves had determined, by examination, that there was a CRA problem - the Fed approved automatically, with no publicly available reasoning for the approval. In this light, it should not be surprising that community groups comment on banks’ application when they have a concern. Otherwise, the issues are never aired, even if the bank has an adverse rating...

The Fed’s memo also provides the following table:

1996 1997 1998 1999 2000
Banks with Less than Satisfactory
Investment Test Ratings 1 9 13 14 13

Banks with a Less than Satisfactory
Rating for both the Investment Test
and Overall Composite CRA Rating 0 1 1 0 0

What does this mean? That of the fifty instances in which banks got Less than Satisfactory CRA Investment Test ratings, only TWO banks were awarded overall less than satisfactory CRA grades. Clearly, the Fed is already largely dismissing the results of the CRA Investment Test. What then is Senator Gramm clamoring about?

On the Fed’s list of banks that received less than satisfactory CRA investment test ratings are subsidiaries of SunTrust, M&I, and Fifth Third. The Fed has allowed all these three companies to expand, most often without even issues Board orders explaining the approvals. Again, what then is Senator Gramm clamoring about?

The Fed also withheld 42 pages responsive to ICP’s FOIA request, redacted portions of many pages, and declined to provide “two pages of handwritten notes” that it located “in the course of searching for records in response” to ICP’s request.

Special report, July 23, 2000: A convergence is beginning, between grassroots organizations in low-income neighborhoods in the United States and the more middle-class environmental and anti-corporate globalization groups which organized the December 1999 protests of the WTO meeting in Seattle. The bases for the alliance are obvious. Many of the same multinational corporations which are funding and participating in the destruction of ecosystems in Africa, Latin America and Asia (issues covered in ICP's Global Inner Cities page) are also either excluding, or taking predatory advantage of, low-income communities of color in the United States. What has hampered collaboration to date is disparities in income and access to technology, incongruity of cultures, and a sort of divide-and-conquer on automatic pilot occasioned by the media, and either a lack of effort, or of efficiency, in bridging these gaps. But recently Inner City Press has seen, and some of ICP's members are beginning to participate in, new efforts to build alliances, the beginnings of a new and fruitful convergence. For example:

Last week, representatives of twenty five organizations gathered outside of San Francisco, for a two-and-a-half day strategy session on the largest U.S.-based bank, Citigroup. Many environmental groups had begun to see the need to expand their advocacy from companies engaged in the extraction or sale of our planet’s dwindling natural resources to the companies which finance and plan such ecologically destructive projects as the Chad-Cameroon pipeline, or China’s planned Three Gorges dam (which would displace two million people, creating a 400 mile reservoir on top of polluted former industrial sites). Inner City Press was invited, to speak and strategize on Citigroup’s destructive practices in the United States: the redlining of low-income communities of color followed by targeting with high-interest rate, predatory loans from Citifinancial; arranging financing for the private prisons of Wackenhut Corrections Corporation; the closing of bank branches, etc.. Also attending were a number of student environmental groups; advocates of boycotting the World Bank’s bonds; and organizations involved in the Seattle WTO protests, and people who’d just attended trainings for the Los Angeles Democratic convention of August 14-17.

The strategies arrived at need not be described here, at least not yet: they will become known, in the near future. But it was the collaboration of such diverse organizations and constituencies, the convergence (a term much-used by the “post-Seattle movement”), that most struck and inspired the participants and observers. Something new is afoot in the United States, something barely if ever covered by the mainstream (read, corporate) media. Citigroup will be the first, but by no means the only, focus of this energy.

Building bridges takes time. Inner city residents (ICP’s members and affiliates included) have perceived the environmental and college student movements as being disconnected from problems right here in the United States, particularly urban problems. In the South Bronx, for example, the Natural Resources Defense Council in the mid-90s promoted a “greenwashing” newsprint factory, that local residents opposed, on grounds of air pollution and asthma. (See this week’s ICP Bronx Report). NRDC was dismissive of Bronxites’ concerns. Its lead scientist said that environmental groups should become like investment bankers, proposed project rather than opposing them. “Why here?” local people asked. No answer was given. The sub-text answers were either (1) “because there’s land,” or (2) “because there’ll be less public process.” This is only one example of the gaps that have developed. But inner city groups, for example organizations active in enforcing the Community Reinvestment Act, haven’t reached out to more progressive / activist environmental groups, made proposals for collaboration, a joining of resources, common endeavors. The time has now come. Corporations like Citigroup have been able to keep separate the activism and demands for accountability of community groups, on one side, and environmental groups, on another side. Seven months into the new millennium, new steps, new convergences, are taking place. It promises to be exciting, and will be covered on this site, including on our just-begun Citigroup Watch page) in the coming weeks and months. As they say, “developing... stay tuned.”

In positive anti-predatory lending news, on July 13, the U.S. Court of Appeals for the Fourth Circuit, in Richmond, reversed Baltimore U.S. District Court judge Marvin J. Garbis’ decision invalidating HUD’s “Credit Watch” program, under which mortgage lenders with the highest foreclosure rates are barred from the FHA mortgage program. One of the first 27 companies so barred, Capitol Mortgage Bankers Inc. of Millersville, MD, sued, and won at the trial level. But the Fourth Circuit appeals court (among the most conservative in the country), ruled that “HUD's treatment of Capitol was fair and reasonable,” and that “[t]he government's interest in prompt termination of lenders who threaten the FHA insurance program is considerable.” During the controversy, HUD removed the Credit Watch section of its Web site; we would expect it to go back up, and soon...

Finally, for this week, a follow-up on HUD/Treasury Task Force: When ICP submitted its written comments to the HUD Task Force, it also asked what HUD would be doing with the testimony presented by borrowers from questionable subprime lenders. On July 12, ICP finally received a response from HUD:

“In response to your question about whether HUD or Treasury processing any of the comments and testimony received as complaints under the fair housing laws, HUD is referring any individual case that gets brought to our attention to the Federal Trade Commission, Bureau of Consumer Protection which will investigate the incident.”

HUD, of course, has primary jurisdiction under the Fair Housing Act. And the Treasury Department, it would seem, would be directly interested in cases involving national banks (regulated by Treasury’s OCC) or federal savings bank (regulated by Treasury’s OTS). Even the General Accounting Office has concluded that the Federal Trade Commission does not have the resources to effectively enforce the fair lending laws. In any case, the above was HUD’s response...

Until next time, for or with more information, contact us.

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Copyright 1999 - 2003 Inner City Press/Community on the Move, Inc.. All rights reserved. As should be clear, but in an excess of caution: under no circumstances does the information in this column (or web site) represent a recommendation to buy or sell securities. For further information, or to request reprint or other permission, contact: Permissions Coordinator, Legal Administration, Inner City Press, P.O. Box 580188, Mount Carmel Station, Bronx, NY 10458. Phone: (718) 716-3540. Fax: (718) 716-3161. E-mail: CRA [at] innercitypress.org