To the Editor:

I heartily agree with Mark Pinsky and Christina Weinmann ["Development Groups Could Play Key Role in Wider CRA," page 13, July 28] that "the need for substantive modernization of the Community Reinvestment Act becomes ever more clear."

As the Federal Reserve Board amply demonstrated in its report on the performance and profitability of CRA-related lending, the current use of the law has resulted in a situation in which one-third of large financial institutions report that CRA lending for home mortgages and refinancings is not profitable.

And when it comes to special deals for CRA lending through third parties, 58% of the large institutions report that these loans are not profitable. Perhaps the first step in modernizing CRA should be harkening back to the language of the law, which states that CRA lending is to be "consistent with the safe and sound operation" of a financial institution.

Call me old-fashioned, but I don't see anything safe or sound about the government forcing banks to lose money on loans.

Phil Gramm
U.S. Senate Banking Committee

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