Comptroller of the Currency Eugene A. Ludwig urged nonbanks Tuesday to adhere to the tenets of the Community Reinvestment Act.
"We have to face up to the fact that the banking industry can only do so much," Mr. Ludwig told San Francisco business leaders. "We must begin now to seriously focus on this central question: To what degree should financial providers besides banks be asked to step up to the plate and participate in a CRA-like program?"
In his speech to the Director's Roundtable, Mr. Ludwig stopped short of recommending that the 1977 law be extended to investment banks, insurance companies, and pension funds. "That is certainly one of the big questions," he said in an interview. "I don't think we can necessarily apply CRA verbatim to nonbanking organizations."
Mr. Ludwig argued for creation of "a set of CRA-like responsibilities that would be appropriate for nonbanks."
The move is necessary, he said, because CRA's reach is being reduced as commercial banks lose business to nonbanks. In his speech, Mr. Ludwig noted that mutual fund assets had surpassed bank time deposits in 1993 and commercial paper outstripped the value of bank commercial and industrial loans the next year.
"If we had a uniform commitment from nonbanks that looked like the commitment banks have made under CRA, we would make a major-league positive impact on the welfare of middle- and low-income America," Mr. Ludwig said in the interview.
Since CRA was enacted, the comptroller said, $215 billion of low- and moderate-income loans have been pledged. Trumpeting CRA's recent success, Mr. Ludwig noted that 81% of that total has been promised in the last three years.
While the idea of extending CRA to cover other financial services providers has been pushed by consumer advocates and even some bankers, this is the first time a leading regulator has broached the issue.
"To raise the question of whether to extend the principles underlying CRA to other parts of the financial services industry will generate controversy," Mr. Ludwig acknowledged.
But he added: "In an era where all financial services are converging, why does only one segment of the financial services industry have to comply with a CRA-type of responsibility?"
Robert Gnaizda, policy director of the Greenlining Coalition, a San Francisco umbrella group for dozens of community organizations, predicted executives would heed Mr. Ludwig's call.
"This could triple the amount of inner-city investments and have a synergistic effect that would make all lending and investments in the inner city far safer and far sounder," Mr. Gnaizda said.
Mr. Ludwig's timing may be opportune. Congress is currently debating financial reform legislation. For the bill to pass, Republicans will need support from Democrats, many of whom favor a wider application of CRA.
Mr. Ludwig noted in the interview that he is pushing this idea personally, not as a representative of the Clinton administration. However, President Clinton has championed community reinvestment in the past, spurring regulators to revamp CRA rules during his first term.