Treasury Secretary Lawrence H. Summers on Friday strongly defended the Community Reinvestment Act, dispelling questions about whether he might be softer than his predecessor on the issues stalling financial reform legislation.

Speaking at a Congressional Black Caucus forum on banking, Mr. Summers said the "next frontier" of civil rights policy is promoting economic opportunity for all Americans. He underscored his point by modifying an adage popularized by First Lady Hillary Rodham Clinton.

"It takes capital to build a village," said Mr. Summers, who moved into the top Treasury post in July, succeeding Robert E. Rubin. "We have to democratize the access to capital in this country and make capital available to all."

Preserving the 1977 reinvestment law, he emphasized, is the top priority of the Clinton administration's economic development agenda.

Without referring directly to Senate Banking Committee Chairman Phil Gramm, Mr. Summers made it clear that the administration will not cave to the Texas Republican's demands to exempt small, rural banks from the CRA or roll back other parts of the law -- even if it means vetoing financial reform legislation.

"We are this year, I hope, going to pass comprehensive legislation to modernize our financial system," Mr. Summers said. "But we should pass legislation that is right.... We will not accept it (the CRA) being scaled back or its basic function spurring investment in communities being interfered with."

Speaking to reporters after his speech, Mr. Summers said the reform deal being negotiated by a House-Senate conference committee also must grant broad powers to direct bank subsidiaries and contain adequate privacy and other consumer protections.

When Mr. Summers succeeded Mr. Rubin, observers wondered how hard Mr. Summers would fight for the administration's positions on reform, or whether he might be more inclined to compromise. Treasury officials had maintained all along that no change in policy would occur, but last week Mr. Summers raised his profile on the legislation.

Early in the week, for example, he praised four studies released by the Financial Services Roundtable supporting the Treasury's argument that direct subsidiaries of banks enjoy no unfair competitive advantages over holding company units or nonbanks.

"The work of these economists," he said, "confirms the conclusion that the Treasury Department, the Federal Deposit Insurance Corp., and other independent analysts reached some time ago: a financial services modernization bill should allow banking organizations to choose the structure that best serves their customers without adversely affecting competition or safety and soundness."

Besides CRA, Mr. Summers listed other administration priorities to promote economic opportunities for minorities.

Noting that 10% to 13% of Americans -- including an estimated 25% of blacks -- do not have bank accounts, he urged more banks to provide the low-cost accounts that Treasury recently unveiled for electronic delivery of federal benefits payments.

"There won't be high fees or punitive overdrafts," he said, "and more Americans can come into the mainstream."

The federal government also must ensure that banks are abiding by fair-lending laws and that they openly disclose their criteria for evaluating borrowers, Mr. Summers said. "We cannot allow discrimination in lending in this country," he said.

The secretary urged Congress to appropriate the $125 million the administration is seeking for the Community Development Financial Institutions fund, and he praised the President's New Markets Initiative to promote economic development in inner cities.

But the bulk of Mr. Summers' remarks centered on CRA and insisting that compliance with the law is actually in banks' self-interest.

In 1998, he said, banks and thrifts made $32 billion of small-business loans in low- and moderate-income areas and another $16 billion in community development loans. Mortgage lending to minorities has skyrocketed, too.

"Banks are doing that because it is profitable," he said. "We speak often to banker after banker who tell us that they now have profitable lines of business in communities and areas ... where they never would have been without the spur" of the CRA.

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