WASHINGTON - In a rare show of unity, bankers, regulators, and community activists all expressed support for revised Community Reinvestment Act rules that the federal banking agencies approved Wednesday.
"It is a constructive attempt to make the process more performance driven," said Richard Whiting, general counsel to the Bankers Roundtable. "It's not perfect. But it seems to be reasonable and balanced."
Said NationsBank senior vice president Catherine Bessant: "It is going to be harder to get a good grade, but these rules are more than worth giving a try. They are reasonable and make sense."
President Clinton also expressed support for the regulators' work. "With these improved regulations in place, the statute can reach its full potential to help our communities help themselves," he said in a prepared statement.
The President urged Congress to leave the reinvestment law alone. With the new rules in place, he said, "Now is the time to end uncertainty and get on with business, not to tinker with the statute."
However, the display of unity on the new regulation vanished on some specific issues.
At the Federal Reserve, for example, Chairman Alan Greenspan broke a 3-3 tie in favor of expanding Home Mortgage Disclosure Act reporting. Bankers now must provide census tract data for mortgages made outside their delineated communities. Several Fed members questioned the need for the data.
But the central bank unanimously agreed to put out for comment a proposal to let banks collect race and gender data for statistical purposes on all borrowers. And it approved the overall CRA changes 5-2, with Governors John P. LaWare and Susan M. Phillips voting against.
Fed Governor Lawrence B. Lindsey, who has worked on the revisions for 21 months, admitted at the start of debate that the final product would not please everyone. "But I believe it is a solid, working document that meets the objectives we set out in 1993," he said.
"The end product will leave no one fully satisfied, and that is the way it should be with a compromise," added Fed Vice Chairman Alan Blinder.
Comptroller Eugene A. Ludwig said the agencies don't want banks to create reams of paperwork. Rather, they want to see loans.
"I really think this is a win-win for our communities and for our banks," he said.
The revamped community reinvestment rules, which the Comptroller and the Office of Thrift Supervision also approved Wednesday, replace the current 12 assessment factors with a three-pronged test focusing on lending, investment, and service.
Examiners will judge a bank against the credit needs of the community, the condition of the local economy, and the size of the institution.
The rules provide for a streamlined exam for small banks - institutions with less than $250 million in assets whose parent companies are no larger than $1 billion in assets. The rules also allow banks to design their own CRA plans, and they provide a special test for wholesale banks.
"We think the streamlined, tiered system is very important to small banks and we think it will reduce the burden on small banks," said Karen Thomas, director of regulatory affairs at the Independent Bankers Association of America.
Regulators gave bankers significant lead time to prepare for the new rules. All new data collection activities will start Jan. 1. But, bankers won't have to follow the rest of the rules until July 1, 1997. They can, however, opt into the new rules earlier.
The new rules also require banks with more than $250 million in assets to report the geographic distribution of their small business lending.
This later proposal drew the most debate. "I'm not sure what additional information it constructively adds," said Ms. Phillips during the Fed debate.
Community activists disagreed, saying that the rule provides the public with the first glimpse at a bank's small business lending.
Still, many activists said they had hoped an earlier requirement that banks report the race and gender of all small business borrower would have survived.
"The rule is going to be helpful," said John Taylor, president of the National Community Reinvestment Coalition. "But it's not where it needs to be."
Community groups said the Republican capture of Congress worked against them by weakening their congressional supporters and placing President Clinton on the defensive.
"I would say this is adequate," said Robert Gnaizda, policy director of the Greenlining Institute. "It's not good. But it is only because without leadership from the administration, there was not much more we could secure."
Paul Schosberg, president of America's Community Bankers, said regulators are not finished. He said they should exempt institutions with satisfactory ratings from some paperwork requirements and give banks with "outstanding" ratings a safe harbor from CRA protests.
Bankers said they won't know if the rules work until examiners appear on the doorstep.
"The proof is always in the pudding," said Jim McLaughlin, director of regulatory affairs at the American Bankers Association.
