Sen. Phil Gramm says federal regulators have grossly underestimated the time it takes banks to comply with the Community Reinvestment Act.

A recent assessment by regulators "suffers from an admittedly fatal lack of data,'' according to a report prepared for Sen. Gramm, the Senate Banking Committee chairman.

Sen. Gramm forwarded the report to the heads of the four banking agencies Monday. Regulators said it is unclear how, or if, they will respond to Sen. Gramm but that his suggestions will be considered.

"The agencies continue to underestimate the CRA-compliance costs for institutions of all size," the Gramm report claims. "A much more complete and rigorous analysis...is needed to portray the full costs."

Regulators were unwilling to respond directly to Sen. Gramm's conclusions, but they said their compliance estimates are not meant to be a comprehensive accounting of the regulatory burden of the CRA, which requires banks to lend equitably to customers of all income levels in their service areas.

The agencies are required by a federal law to quantify how long it takes banks to collect data on CRA-related loans. "It's a very narrow definition," a spokesman for the Office of the Comptroller of the Currency said of the figures required by a paperwork-reduction law. "Only some things qualify as time" to be counted.

The agencies released their most recent CRA compliance-time estimate in May after criticism forced them to revamp an estimate issued last year. The regulators said the industry spends 1.25 million hours a year collecting CRA data, ranging from 10 hours a year at a small bank to 635 hours at a large one. The Office of Management and Budget approved those figures last week, according to the OCC spokesman.

But the report prepared for Sen. Gramm claims that small-town bankers devote 50 to 200 hours a year to stay in line with CRA. Regulators have more than doubled previous compliance-time estimates for large institutions, but they have held firm on low estimates for banks with less than $250 million of assets.

"This is particularly unfortunate, since many small banks report that the 1995 efforts to reduce CRA regulatory burdens have actually increased burdens and made regulation more arbitrary," the report says.

The Senate Banking report is the latest salvo in Sen. Gramm's yearlong campaign against defenders of the CRA, and is expected to buttress his case for reforming the controversial 1977 law. Committee hearings on CRA are tentatively slated to begin in September but no dates have been scheduled.

In the financial reform bill the Texas Republican succeeded in convincing the Senate to exempt from CRA rural banks with less than $100 million of assets and make it harder to protest applications filed by institutions that have had "satisfactory" or better ratings for three years. The legislation would also require disclosure of payments banks make to community groups as part of their community-reinvestment commitments. Sen. Gramm opposes a provision in the House financial reform bill that would require banks merging with securities or insurance companies to have -- and keep -- a "satisfactory" or better CRA rating.

President Clinton has threatened to veto the financial reform bill if CRA is diluted, but Sen. Gramm has not yet relented.

John Taylor, president of the National Community Reinvestment Coalition, said Sen. Gramm is exaggerating the regulatory burden on banks. "There has been more lending (under CRA) to low-income people and minorities in the last six years than ever," Mr. Taylor said, and "it coincides with the six most profitable years in American banking. ...The banks aren't crying. They are doing just fine, thank you."

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