Following are excerpts from Mr. Bush's remarks last week in Chicago at the annual conference of the National Association for the Advancement of Colored People. The nonprofit Woodstock Institute promotes reinvestment and economic activity in poor and moderate-income communities.

In 1977, Congress passed a seemingly simple piece of legislation, the Community Reinvestment Act, which stated: Regulated financial institutions have an affirmative obligation to help meet the credit needs of all of the community inside their service area, including low- and moderate-income neighborhoods.

In July 1993, President Clinton announced that he was asking bank regulators to reexamine the regulations under the CRA to make them more effective.

The Office of the Comptroller of the Currency came up with draft regulations that emphasized counting community reinvestment loans in a variety of ways and evaluating them, not only by any absolute standard, but by judging one bank's activity by the activity of other banks operating in the local market.

The key improvements we must demand include: a provision for counting and evaluating business loans... and including the race of the applicant, despite [Fed] Chairman Alan Greenspan's strong objection to this provision.

Critical Players

The new regulations must include most smaller banks. The proposed regulations exempt from the full CRA examinations banks under $250 million in assets. These smaller banks are critical players in many urban neighborhoods and rural communities and the threshold for the "streamlined test" should be reduced to $50 million in assets.

The pressure point is the senior bank regulatory agency - the Federal Reserve Board and its chairman.

There is no doubt that the Fed has been dragging its feet and that the Fed - representing the banks for themselves, not representing banks as they affect the rest of us - is threatening a historic opportunity to get CRA right so that the rest of us can get on with the difficult task of rebuilding our neighborhoods. Particular Fed objections deserve to be answered:

Objection. Numbers are deceptive and don't always give a fair picture of a bank's activity.

Response. Numbers are tricky, but banks live and die by numbers for their legitimate private purpose of making a profit, and decent enough numbers can be fashioned to help judge their community reinvestment record.

Objection. The use of numbers is tantamount to "credit allocation" - i.e., the government telling private financial institutions how much to lend to whom.

Response. This is not true. The numbers will be used to see how banks do comparatively against other banks. And believe me, while we have seen improved CRA activity in the past few years, few banks are out there rate-busting.

Objection. Community groups only care about short-term projects, not their long-term financial viability, and the new regulations will force banks to make bad loans. This is virtually a direct quote from Chairman Greenspan.

Response. Mr. Greenspan, you have been hanging around the marble halls of the Fed Reserve too long. No self-respecting community development organization will knowingly make a bad loan. The costs to the borrower, the neighborhood, and the organization are far too high.

There have been bad loans in the past, but most of them were FHA [Federal Housing Administration] insured loans made largely by a few mortgage brokers who took the fees and ran. There is plenty of evidence, including a major Woodstock Institute study, "Sound Loans for Communities," that good loans can and are being made in lower-income neighborhoods, and that those neighborhoods are an underbanked market opportunity for lively financial institutions.

Besides, show me the bank that has got into trouble making community reinvestment loans - speculative corporate real estate, bad oil and gas patch loans, poorly underwritten loans in South America, yes, but community reinvestment loans, no.

My real fear is ... that the banks and the Federal Reserve Board are playing a waiting game, hoping for a weakened administration or merely for time to run out. Remember that throughout the 1980s the banks were trying to gut the CRA and the regulators were not enforcing the law.

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