WASHINGTON -- Call it revenge of the bank compliance officer.

The banking industry has responded with gusto to regulators' calls for thoughtful comment on their proposal to reform the Community Reinvestment Act. So much gusto, in fact, that the agencies have been struggling with a hefty paperwork burden of their own.

Lenders have flooded the agencies with an estimated 6,700 letters. No one's certain of the exact number, though, because some agencies are still slogging through their piles. But at the Federal Reserve alone, a partial stack of the comments stands almost two and a half feet tall.

Bankers have complained for years about the excessive documentation required to prove CRA compliance. More than one has paraded in front of regulators a picture of a frazzled compliance officer leaning on a stack of papers -- records they say are needed to prove they are living up to the spirit of CRA.

Now its the agencies' turn. Office after office is the banking bureaucracy is buried in letters. Letters from community bankers, letters from industry giants, letters from congressmen, activists, and surprisingly, the Environmental Protection Agency.

Even Arkansas Banking Commissioner Bill J. Ford weighed in. President Clinton -- who called on the regulators to reform CRA, and who also appointed Mr. Ford to his current post -- might not be too pleased to read his former deputy's dissatisfaction with the proposal.

Some of the letters sent to the agencies are just a few sentences, many are 20 to 30 pages. The longest -- by the New York Clearing House -- numbered 127 pages.

That one includes a lengthy study detailing the shortcomings of the proposed market-share test, a key measurement in the plan.

The paperwork burden has weighed heavily on the agencies. Some officials, who in February pledged to read every letter, had given up by March.

Those not assigned to write official summaries are now content to peruse them in bits and pieces.

And the regulators have learned how easy it is for paperwork burden to multiply. At the Fed, no fewer than 18 copies are made of each letter.

By conservative estimates, that would put the agency's total slash at least 40 feet tall -- that's probably high enough to cast a shadow on Fed Governor Lawrence Lindsey's second-story office.

'Overly Successful'?

The industry's revenge may or may not be sweetened by the fact that regulators asked for the paperwork.

Throughout their hearings, speeches and private meetings, they stressed that more than ever, they wanted thoughtful, meaningful comments.

"We have perhaps been overly successful," said Griffith Garwood, head of the Fed's consumer and community affairs division, in a recent address.

The CRA comment period closed five weeks ago, on March 24 - one month later than originally intended. But letters continued to pour in even after the March deadline. A few are still arriving, the agencies report.

The Comptroller's Office finally decided that no letter received after March 31 would be included in the public record. That was fortunate for Rep. Henry B. Gonzalez and Rep. Joseph P. Kennedy 2d. Their joint letter was dated March 30.

In the 'War Room'

Despite the huge response, the agencies are dutifully plowing through the letters, via an elaborate set-up of task forces, official memos, and computer programs.

Fed officials, after realizing the overwhelming burden of their project, even called in officers from seven different reserve banks.

The group squirelled themselves away in a windowless conference room -- dubbed the CRA "war room" -- mulling every letter sent to the agency. Their mission? To dissect the letters -- which had already been scanned into a computer system -- into 92 different issues, and code them appropriately. That would give officials an easy way to pull up, verbatim, all the comments relating to a particular issue.

The group needed a couple of weeks, six computers, and three pounds of chocolate to catalog all the letters.

Those trudging through the responses became so immersed in the project, they began to speak in the specially designed codes. "60NO, 60NO, 60NO," they chimed, referring to the vast number of letters from community bankers opposing the 60% loan-to-deposit benchmark.

They also cataloged a lot of "NOREGs," those opposing the rule in full, and a fair number of "TOOHARSHs" meaning the proposed use of civil money penalties were not a good idea.

Offering Insight

Bankers big and small did their part to share their paperwork nightmare with the agencies.

Scores of industry giants wrote in, with dense and lengthy criticisms of the plan's major elements: market share, data collection, and enforcement powers, to name a few.

But small bankers were more pointed. They deluged the agencies with pithy letters, intent on urging regulators to follow through on their proposal to ease burdens for banks with assets less than $250 million.

Many of these letters sounded suspiciously similar, and for good reason. A few bankers included with their comments the Independent Bankers Association of America's "Banker Alert," which described in detail issues bankers should raise.

The more creative made clear their distaste for the law. Phrases like "socialist agenda," "nationalizing the banking system," and "unintended consequences" were frequent. "Semantic sinkhole" was the phrase used by Duane E. Schuh, executive vice president of First Security Bank of Underwood, N.D.

"Is anyone up there listening?" asked Virgil L. Youngblood, senior vice president for compliance at City National Bank, Mineral Wells, Tex. "Come examine us to the nth degree. You will like our reports. We can even argue over whether the map pin location is correct and won't that be fun. But, as an over 75-year-old bank serving only our community, CRA we can do without."

Fred H. Brannen Jr., senior vice president of Brannen Banks, Inverness, Fla., said the proposal is "not only bad, it is the most frightening regulatory item that I have seen in many years."

The 60% loan-to-deposit ratio guideline, he said should be "shot with a silver bullet, have a wooden stake driven through its heart, and be buried in a concrete vault so that its ugly head is never again raised."

C. Robert Brenton, chairman of Brenton Banks, Des Moines, said parts of the plan would fuel conflicts between banks and the public. "Why don't you just line all the bankers up with a 'wanted' poster around their necks?" he asked.

And the sentiment of much of the industry was captured by Jack A. Marcum, president of Northland National Bank: "When I first heard about restructuring CRA I was happy; now I'm not so sure."

Gerald Holland, president of Bank of Coushatta, Louisiana, was perhaps the least subtle in detailing his disdain of CRA -- the current or proposed rules.

He suggested the administration promote a new type of loan-backed instrument to be sold on secondary markets: Community Reinvestment Act Program loans, which he said could be known by their acronym.

"Voila! Using the flexibility of private create liquidity with their lower quality government-mandated loans and the socialists in the White House are satisfied," he said.

Activists' Perspective

Bankers weren't the only ones to respond to the agencies' calls for comment. Community activists warned the agencies to toughen their proposal, and not to take bankers' bitter comments too seriously.

"The agencies should realize that banks are never going to fall in love with CRA," wrote the Consumer Federation of America. "So the regulators should disabuse themselves of the notion that their role in CRA is to make banks happy."

Alan R. Morse Jr., banking commissioner of Massachusetts, sent in a letter of opposition, urging the agencies to withdraw their proposal and redraft it. But his colleague, Massachusetts Attorney General Scott Harshbarger, wrote in expressing "strong support."

Even the folks from Arkansas didn't seem too happy. Several banks, including the well-connected First Commercial Corp. and Worthen Banking Corp., criticized the plan.

Mr. Ford, the banking commissioner appointed by then-Gov. Clinton, wrote that the proposal would "push banks to engage in riskier lending practices, impose micromanagement of the banking system to the extreme, and create even more costs and burdens, despite the perception that the overhaul would reduce them."

Carol Browner, administrator of the EPA, wrote that she was interested in the proposal because of the "nexus between economic and environmental well-being."

Regulators won't say how quickly they can slog through all the comments. They won't say when the hope to have a new CRA finally in place.

And perhaps most importantly, they won't say what they think about a recommendation they found on hundreds of comment letters: Try again. Give us another proposal, another rule for us to comment on.

Ah, sweet revenge.

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