WASHINGTON - Senate Banking Committee Chairman Phil Gramm on Tuesday exhorted bankers to stand up to activists who demand donations in exchange for not protesting mergers on Community Reinvestment Act compliance grounds.
"Let me be clear: CRA as it is now implemented in America is extortion, and I intend to fight it every day," the Texas Republican said in a speech at the government affairs conference of America's Community Bankers.
"If you think you are being abused, tell me about it," Sen. Gramm said. "If you think you are being extorted, tell me about it. Stand up, and I'll stand up with you."
Sen. Gramm said that bankers bear some of the blame for their situation because they fail to resist what he characterized as institutionalized corruption.
"It is amazing to me," Sen. Gramm said. "I can meet with the largest bankers or the smallest bankers and in private every one of them hates CRA, every one of them thinks it is extortion. And yet in public, they're all eager to run up and kiss it on the mouth."
Speaking earlier Tuesday to the same group, Federal Reserve Board Governor Edward M. Gramlich said that the so-called CRA sunshine provision in the Gramm-Leach-Bliley Act of 1999 - which requires banks and community groups to disclose donations of more than $10,000 to the groups and loans of more than $50,000 to them - will supply hard data about interactions between banks and community groups.
"There are allegations that there is a lot of extortion in the process," Mr. Gramlich said, "and there are a lot of denials. Now official records will be disclosed, and we'll see." Whether the provision will have a chilling effect on community groups' negotiations with banks, or will simply "calm fears" about extortion, remains an open question, he added.
Sen. Gramm, who championed the disclosure provision, said it will have another benefit. By making deals between banks and community groups public, he said, "I am hoping it will shame you into not doing it."
Community group leaders deny they are shaking down bankers.
"Where is the corruption he is pointing out?" asked Matthew Lee, president of Inner City Press/Community on the Move, in an interview "He hasn't presented a single example. Corporate responsibility is not a crime. Similar commitments are made in other industries, where there is no protest and comment process."
On other subjects, Sen. Gramm reiterated his support for blending the commercial bank and thrift charters, but he assured thrift executives that a merged charter would not scale back their institutions' powers. "I will never, ever support diminishing your charter, period," he said.
The Senate Banking chief said he supports a bill passed by the committee last year that would let banks earn interest on business checking accounts and on reserves held at the Federal Reserve. Sen. Gramm said he expects the bill to pass the Senate without debate by yearend.
- Remarks by Governor Edward M. Gramlich on CRA and Financial Modernization - March 7, 2000
(Source: The Federal Reserve Board)
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