CHICAGO -- The greatest barrier to widespread, profitable community development lending is not lack of money or lack of will but a lack of qualified staff, according to Federal Reserve Board Governor Lawrence B. Lindsey.

"What is in short supply is not financial capital but human capital," he said. "It really comes down to no more or less than knowing your market and having the qualified people out there to do the lending for you."

Qualified people are in short supply, the Fed governor said.

Altruists Needed

"They are basically extremely talented people who could make six figures on Wall Street but are willing to make $35,000 out of a sense of social conscience," he said.

Mr. Lindsey made his comments at a conference sponsored by the Federal Reserve Bank of Chicago, where opinion seemed to be divided on whether Community Reinvestment Act lending could be profitable.

"On average," Mr. Lindsey said, "CRA loans are not far from the general quality and performance of other loans at banks." Noting, however, that CRA loans vary widely, he reiterated that it takes good people to make good community development loans.

Lending talent, he said, can be found in groups such as Local Initiatives Support Corp. and Neighborhood Housing Services, which help lenders structure and package these loans.

"People that use LISC generally get extremely high rates of returns, sometime as high as 15%, which is attractive by any measure," Mr. Lindsey said.

The Fed governor also offered evidence that CRA is working: A Fed survey found mortgages are generally offered at lower rates or with easier terms in the inner city than in the suburbs.

Also at the conference, Fed Chairman Alan Greenspan said he believed CRA's "basic philosophy" accords with a profitable, efficient banking system.

"The essential purpose of CRA is to try to indicate and make available to the banking community that there have been and are an awful lot of lending opportunities which are profitable to the banking community but, because of past culture, discrimination, or worse, [have] not been appropriately addressed," Mr. Greenspan said.

"It's important for us to keep that philosophy in mind," he added, "and not let CRA become something other than its basic, fundamental, positive purpose in an economic system."

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