WASHINGTON --A Federal Reserve Board governor and a leading community activist argued last week over whether regulators need race and gender data to thwart small-business loan discrimination.
The data reporting requirements are included in the revised Community Reinvestment Act proposal, which is out for public comment until Nov. 21. The proposed rules would require banks to report the race and gender of small-business applicants for loans of less than $1 million.
Banks would compile that information and release it in aggregate form to the public. Regulators, however, would get more detailed information for each loan.
Fed Governor Lawrence D. Lindsey said at a Manhattan Institute seminar that the agencies don't need additional data because they already enforce fair-lending laws for small-business loans.
"The way we do it now is, if there is a complaint, we investigate the complaint and turn it over to either [the Department of Housing and Urban Development] or the Justice Department," Mr. Lindsey said.
The Fed's reluctance to embrace more data reporting did not surprise Allen J. Fishbein, general counsel of the Center for Community Change.
"In the matter of civil rights responses, the Federal Reserve has always had to be dragged kicking and screaming," he said.
Mr. Fishbein knocked Mr. Lindsey's complaint-driven system.
"I think we found on the housing side that people often don't know they are being discriminated against," he explained.
Race and gender data for small-business loans would give regulators their first look at whether discrimination actually occurs, Mr. Fishbein said. "They don't have the tools at this point to spot discrimination," he said.
Mr. Fishbein then challenged Mr. Lindsey to name one institution that the Fed had found discriminating against minorities or women looking for small-business loans.
Mr. Lindsey dodged the question, stating instead that CRA reform is supposed to prevent banks from treating customers differently because of race or gender.
He said community advocates, such as Mr. Fishbein, would prefer to broaden CRA compliance to include whether bank policies have a different impact on minorities and women, regardless of whether everyone is treated the same.
"If that is your standard, then you would need to collect more data," Mr. Lindsey said.
Mr. Lindsey also questioned whether reporting requirements help combat so-called red-lining. "The rest of the proposal does a very fine job of doing that without this part of the proposal," he said.
The rest of the CRA proposal places more emphasis on an institution's lending record and less on following rigid guidelines.
The data reporting requirements also could invade borrowers' privacy if regulators or legislators eventually decide to drop some current protections, Mr. Lindsey said.
And the Fed governor said data the banks report is suspect because it will not cover all the lending activity in a market. Banks compete with other lenders that are not subject to CRA reporting requirements.
Mr. Fishbein disputed those points, saying the proposal safeguards privacy and provides enough data to determine whether an institution deserves further scrutiny.
