To counter attempts to curb the Community Reinvestment Act, the Clinton administration has armed itself with data showing that activists rarely succeed in stopping bank mergers.

Fewer than 1% of more than 86,000 bank applications filed since 1985 were protested on CRA grounds, according to a Treasury Department report. Of those 755 CRA protests, 690 were rejected by regulators, according to the Treasury analysis.

"This data suggests that banks need not capitulate to unwarranted protests," said Richard S. Carnell, assistant secretary of the Treasury for financial institutions. "Public comment plays a meaningful role in the process of identifying and assessing CRA performance."

Since CRA rules were revamped in 1995, the Treasury said, regulators are handling protests faster. From the beginning of 1996 to the end of 1998 , 42% of CRA challenges were resolved within 60 days, and 75% within three months.

Protests by community groups do not hamper bank mergers and should not be used as an "excuse" to scale back CRA requirements, said John E. Taylor, president and chief executive officer of National Reinvestment Coalition, a Washington-based association of community organizations.

"The impact of CRA on bank applications has been grossly exaggerated," Mr. Taylor said. "I wish it were true."

The financial reform legislation adopted May 6 by the Senate on a 54-to- 44 vote would make it harder to stop many bank mergers.

Merger applications filed by banks with "satisfactory" or better CRA ratings for three consecutive years could not be protested on community reinvestment grounds. Rural banks with less than $100 million of assets would be exempt from CRA compliance.

The Senate bill also would require banks to disclose cash payments to merger opponents.

In January, Sen. Gramm asked banking regulators for information about merger protests, including the names of the challengers. He plans to hold hearings on CRA later this year.

A spokeswoman reiterated the Texas Republican's concern that banks are subject to intimidation. "Community groups have gotten very adept at using CRA to get agreements with banks with just the threat of a protest," she said.

That concern was behind Sen. Gramm's support of disclosure of "how much money these organizations are getting from insured institutions," the spokeswoman added.

Mr. Taylor of the National Reinvestment Coalition said he knew of no such agreements. He added that attacks on CRA as costly are unfounded.

"If God showed up and said 'My son Phil, this is a good thing and not the burden you purport,'" Mr. Taylor added, "he would come out with a statistic to prove God wrong."

The House takes a different approach to CRA in its version of financial reform legislation. Banks merging with securities or insurance firms would be required to have and maintain "satisfactory" ratings.

Assuming the bill is approved by the House, lawmakers from both chambers would have to negotiate a compromise. The Clinton administration has vowed to veto legislation that rolls back CRA.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.