|Testers' for Loan Bias in Banks Would Be Required by Kennedy

WASHINGTON -- Rep. Joseph P. Kennedy 2d, D-Mass., plans to offer an amendment this week that would require regulators to send "testers" into all U.S. banks in search of lending discrimination against women and minorities.

The measure, which is to be offered as an amendment to the omnibus banking bill, would also require a more critical look at lending patterns and require "prompt corrective action" by banks that discriminate.

A separate section of the Kennedy amendment would require banks that want to branch interstate to make commitments explaining how they will meet Community Reinvestment Act requirements. Institutions with less than $100 million in assets would be exempt.

Kennedy's 1989 Victory

The House is to take up the bill Wednesday or Thursday, although some indications this week were that the vote could be delayed.

Rep. Kennedy, who shocked bankers two years ago with a floor victory that dramatically expanded reporting requirements under the Home Mortgage Disclosure Act, is being taken seriously this year.

First, a recent Federal Reserve report, which showed that banks turn down minority mortgage applicants up to 2.4 times more often than other borrowers, has created a receptive atmosphere on Capitol Hill for Rep. Kennedy.

And most bank industry lobbying resources are being directed at a section of the bill that bankers believe would place unworkable restrictions on new securities powers, while rolling back existing authority to market insurance.

Measure May Get Floor Time

As a result, bankers believe the House Rules Committee will include the Kennedy amendment among the handful of measures that will be considered on the House floor. And they believe he has a good shot at winning.

"Bankers have never seen the kind of regulatory intrusion they will get with the Kennedy amendment," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America.

Although the independent bankers group supported Rep. Kennedy's CRA provisions when the bill was considered by the House Banking Committee, the trade group opposes the new anti-discrimination amendment.

"The [Home Mortgage Disclosure Act] part of the Kennedy CRA is an enormous new burden," Mr. Guenther said. "We will oppose the Kennedy amendment."

Rep. Kennedy has elevated the measure to a top priority. Although he originally intended to offer legislation that would require banks to offer so-called "basic banking" services to the poor, he decided to put all of his energy behind the CRA/HMDA amendment after seeing the Fed's HMDA report.

Rep. Kennedy was also influenced by a recent Federal Reserve Board decision to reject a proposal from its Community Advisory Council to use "tester" loan applicants to find out whether banks discriminate against minority group members, the aide said.

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