WASHINGTON - A national association of housing activists has blasted a legislative proposal to exempt banks with satisfactory Community Reinvestment Act records from merger protests.

The Association of Community Organizations for Reform Now said in a 13- page report issued Tuesday that separate House and Senate bills won't work.

It said the bills would shield from public scrutiny too many banks with large rejection-rate disparities between white and minority applicants.

In addition, the group said such safe harbors "breed complacency and mediocrity" because bankers no longer must worry that a community groups could block a merger.

"The report provides additional confirmation of what we've know for years - CRA ratings are a poor measure of banks' actual lending to all members of the communities they claim to serve," Acorn national president Maude Hurd said.

"Under these proposals, banks would be given a green light to redline our communities," Ms. Hurd added.

Acorn has used CRA protests to block mergers until banks boost lending in low-income and minority communities. Some of these deals allow Acorn to receive fees for conducting outreach activities and providing prescreening services for the banks.

The group, which examined Home Mortgage Disclosure Act data, said the rejection-rate disparities it found between whites and minorities in its 22-city analysis show that even the best banks can have community reinvestment problems.

But, bank advocates have long questioned statistical accuracy of development act-based rejection-rate studies. They have said the studies punish banks that make the greatest thrust into low-income and minority communities.

Acorn said in its report that safe harbors will not increase bank involvement in poor communities.

"It is counterproductive to 'reward' institutions by derailing a process that has a proven track record of accomplishment," the group wrote.

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