While industry groups, regulations, and politicians in Washington debate the merits of the Community Reinvestment Act, growing numbers of bankers are out in their communities making the law work.

These lenders have concluded that lending to people with low or moderate incomes can be an important, successful part of their business.

And through many of the lenders were initially prodded into action by the reinvestment act and other mandates from Washington, they say they now are motivated by a sense of social commitment and the realization that they need to find new markets in order to survive.

"It's not just the right thing to do, it is the smart thing to do in a pluralistic and highly competitive marketplace," said Richard M. Rosenberg, chairman and CEO of Bank America Corp. He made the remarks in a speech to about 300 bankers and community advocates last week.

Making an Impact

The group was in San Antonio at a conference sponsored by the Federal Reserve Bank of Dallas to trade reinvestment-act success stories and talk about the obstacles faced by lenders trying to comply with the law.

Discussions focused on a variety of initiatives that banks can undertake to make a measurable impact in the economic life of poor and moderate-income communities.

These included public-private partnerships, community development corporations, microloan programs, and special small-business lending initiatives.

"Our objective is to focus attention not on paperwork, but on ways to achieve the intent of CRA, which is lending," said Dallas Fed president Robert D. McTeer Jr.

A Showcase for Lenders

"Banks have been getting the message and they are beginning to respond," he added. "They are taking leadership roles and serving as role models for others, showing that this lending can be done without busting the bank."

Lenders at the two-day meeting showcased initiatives unique to their communities, which ranged from one-bank towns to large southwestern cities. But all of the approaches shared some common elements that could be adopted by banks everywhere.

Perhaps the most important lesson is that no reinvestment-act effort will succeed unless it is viewed as a serious, long-term, money-making strategy by everyone from CEO down to the loan officer. Viewed as merely a compliance issue, they said, such efforts are doomed to fail.

"Bankers who get into the market with a profit motive will invest the time and resources to make the right deals and ensure safety. and soundness," Mr. Rosenberg said.

"Those without a profit motive are unlikely to make the types of investments needed for the long-term success of a CRA program.

Many, officials of small banks said they've been doing this all along.

Charles M. Neff Jr.. president and CEO of Houston National Bank. spoke about his bank's lending to two small, minority-owned businesses, in a panel discussion called "A Bank with a Fan Club."

High-Tech Tofu

The borrowers were there, too, to describe the impact Mr. Neff has had on their lives.

Carol S. Chiu related that Houston National enabled her to start a tofu-production business and then expand it to a 30.000-square-foot plant with a showcase high-tech production line.

As a result, Ms. Chiu's tofu will be available beyond Texas - in Oklahoma, Georgia, and Louisiana.

"Banks with a fan club are not doing anything extraordinary," Mr. Neff said. "Even the small banks in their way can help. We can all do it our own way."

His reinvestment-act grade? "Satisfactory." "We were told, "Your loans are great, but you just don't have the paperwork to support it,'" he said.

Getting beyond the "what's going to please the regulators?" mindset to focusing on actual impact in the community can be a big breakthrough for an institution, the bankers said.

Though everyone wants an "outstanding" rating, some have gotten beyond the presumption that a "satisfactory" grade means they are only doing in average job.

Fair-Lending Initiatives

That goes for not only reinvestment-act lending but also for fair-lending initiatives designed specifically to make sure banks aren't discriminating against minorities. Bankers flocked to the conference sessions on fair-lending initiatives by banks and regulators.

"Fair lending should be seen as a market opportunity," said Richard C. Walker 3d, associate director of community affairs at the Boston Fed. "If seen only as a compliance issue, you do yourself and others a disservice."

Successful lenders at the conference also stressed the importance of working closely with community groups and even other banks, to determine the needs of the community and to come up with feasible programs.

Working Together

Marc Shapiro, president and CEO of Texas Commerce Banc-shares, said community partnerships and interbank initiatives have been crucial to his bank's successful move into community lending.

He described the efforts of the Chemical Banking Corp. subsidiary to develop an interbank community development bank in Houston after learning that small businesses were starving for venture capital.

Today the Houston Small Business Equity Fund has raised $7.5 million of an expected $10 million in funding. The fund is now the largest bank-led community development corporation of its kind in the country. according to Mr. Shapiro.

"We knew we could not fill this void alone, but we could do something about it working in tandem with other banks," he said.

A Premium on Creativity

Sometimes successful community lending in the end just comes down to creativity, commitment. and sheer will, industry members said.

"There's always some way to get the job done." said Donald E. Powell. chairman. president and CEO of First National Bank of Amarillo. Ultimately, bankers said they hoped that a serious, proactive approach to community lending will do more good, both now and in the future, than endless debate about the evolution of reinvestment mandates. Let's stop talking about it and just do it, they said.

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