A Quiet Attempt to Bring Redlining Back


Washington. The neighborhood movement's prized Community Reinvestment Act of 1977, the nation's premier bill to stop banks from "redlining" poor neighborhoods, came perilously close to being gutted last month.

A Pennsylvania congressman, Democrat Paul Kanjorski, suddenly produced an amendment in the House Banking Financial Institutions Subcommittee to exempt 80 percent of the nation's banks from compliance with the Community Reinvestment Act.

Mr. Kanjorski presented the amendment as a paperwork relief bill for regulation-strangled small banks. To the shock of many, it got the subcommittee's approval.

The whole episode makes you wonder whether the Congress suffers from such intense Potomac fever it has lost all track of what's happening in America's hard-pressed urban neighborhoods. Any Banking Committee member ought to have known the reinvestment act has produced $7 billion in loan commitments to low-income areas, at a time when regular federal aid to cities is being decimated.

Take away the act, and the vast majority of bank loans in thousands of hard-pressed neighborhoods could evaporate, coast to coast. Banks would no longer feel anything more than a moral obligation, if that, to lend in the neighborhoods where they take deposits and do business.

Yet with a few bank lobbyists whispering in their ears, the subcommittee members blithely voted to exempt 10,000 of the country's 12,300 banks from Community Reinvestment Act requirements.

Only the biggest banks would still have been covered -- and they don't have a big share of their loans in poorer neighborhoods anyway. Small banks would have had carte blanche to go back to the practice of drawing an imaginary red line around poor neighborhoods and simply refusing to make loans there.

The lore of the banking industry has been that loans in poor neighborhoods are too risky. This is the industry which lost billions in Latin American loans and invested in so many real-estate boondoggles of the '80s that U. S. taxpayers are now stung with hundreds of billions to bail out its sinking institutions.

The Kanjorski amendment surfaced in the same month Federal Deposit Insurance Corporation head William Seidman had to go to Capitol Hill to ask for another $80 billion to bail out failing banks.

The neighborhood movement was not about to take the attempted reinvestment act repeal lightly. For these community-based groups, choking off most of act was akin to what a move to cut 80 percent of Social Security benefits would have been to the senior citizens' lobby.

Out of Chicago stormed Gale Cincotta, head of National People's Action, disciple of the legendary radical activist Saul Alinsky. Ms. Cincotta is the acknowledged "mother" of the 1977 law. Dozens of groups joined the fray, among them the Washington-based Center for Community Change, the National Neighborhood Coalition, the National Council of La Raza and the Consumer Federation of America.

They complained of "killer amendments," "a war on the poor, local communities, minorities and consumers." And when the amendment came up before the full House Banking Committee, ACORN, the Association of Community Organizations for Reform Now, brought in busloads of protesting constituents.

It worked. The Banking Committee beat back the amendment on a 40-12 vote after its chair, Henry Gonzalez (D-Texas), made an impassioned plea for the Community Reinvestment Act as a product of 20 years' struggle.

The final battle's not yet won. The Kanjorski amendment could be offered on the House floor to omnibus legislation to remake the nation's banking system. The Senate Banking Committee has yet to vote on the package, and could reverse the House committee decisions.

But the odds are that the Community Reinvestment Act, with its grassroots support behind it, is now safe. The irony is that the flank attack came just two years after the Congress voted to toughen the act substantially, just as more and more banks seem to be accepting it and just as a critical numbers of community groups nationwide are learning how to use it.

Take as an example the Pittsburgh Community Reinvestment Group, a coalition of 25 community-development corporations and neighborhood groups formed in the late '80s to reverse the )) lending policies of the city's financial mega-institutions.

Armed with evidence of redlining by Pittsburgh's Union National, which was attempting a merger, the Pittsburgh community coalition was able to squeeze out a $109-million, five-year neighborhood reinvestment program, one of the country's largest.

In neighborhood after neighborhood, the money has made a difference. Homewood-Brushton, an inner-city neighborhood hard-hit by abandonment and graffiti, is an example. A community-development corporation pioneered a cleanup, neighborhood festivals and a monthly newspaper. And when it was ready to put up three housing projects, totaling 33 units for low-income families, it tapped the reinvestment act money.

Will such advances remake a city? Can they compensate for the federal disinvestment of more than a decade? No.

But whatever hope exists in many neighborhoods comes from community-development groups such as Homewood-Brushton. They are struggling to reweave the strands of a social fabric that public indifference has left in shreds. The ultimate cruelty would be to cut off the Community Reinvestment Act, this last streamlet of assistance. One is left aghast that the Congress even entertained the idea.

Neal Peirce is a syndicated columnist.

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