When Republican Senator Phil Gramm took over the Senate Banking committee last year, one of his first crusades was against the 23-year-old Community Reinvestment Act. But recent statistics from the Treasury Department show that Gramm’s jeremiads are misinformed, at best.
The law, which requires banks to invest throughout the region they are chartered to serve, has lead to a marked increase in inner city lending. But to Gramm, the law’s an unholy outrage, because it gives community groups the right to challenge major bank mega-mergers. “Banks…are routinely shaken down every time they want to open a branch, every time they want to start a new bank, every time they want to engage in a merger,” he once ranted.
But Gramm aside, banks are hardly deluged by CRA challenges. In the first quarter of 2000, precisely three bank mergers nationwide have attracted comment or challenge. (The numbers were provided by the Federal Reserve Bank to Bronx gadfly and community reinvestment expert Matthew Lee of Inner City Press/Community on the Move.)
Filings are down considerably from 1998, when 26 groups filed protests or comments.
“In part, it’s because bank merger activity has been slowing down–because there are no banks left to merge,” pointed out Sarah Ludwig of the Neighborhood Economic Development Advocacy Project. “Also, a lot of groups that typically weigh in on mergers and bank applications are all really swept up in [responses to] predatory lending right now.”
One other possibility: Community groups have been scared off by Gramm peering over their shoulders. His staff has held a standing order with the Federal Reserve Bank to get copies of any CRA-related filings, and some CRA boosters have worried that Gramm’s snoops may be intimidating community groups.