President Clinton's recent visits to inner cities to promote corporate investments are commendable. But the initiative is probably destined to fail without a "New Millennium Community Reinvestment Plan" that encourages every type of financial institution to replicate what fewer than two dozen banks have sought to achieve with their $1 trillion in CRA pledges.

In negotiating the financial modernization legislation, the administration may have missed a golden opportunity to leverage inner-city Community Reinvestment Act commitments supported by the Congressional Black Caucus as well as other members of Congress. These reforms could have enhanced legislation that many believe has few tangible consumer or low-income benefits and might, during a severe economic downturn, lead to massive bailouts of megabanks.

It may have been this combination of hope and concern that led one-third of the Black Caucus to vote against the bill.

One of the legislation's most glaring weaknesses is Sen. Phil Gramm's hypocritical "sunshine" provisions, which require the disclosure of financial benefits to nonprofits from CRA commitments.

Sunshine is required in exquisite and perhaps punitive detail for community groups that seek to fulfill the President's dreams for the inner city. Disclosure, however, is not required for global insurance and securities firms that aggressively seek high-risk investments in corrupt foreign nations and practice "benign neglect" for the inner city.

No sunshine or disclosure is required for small-business lending, not even a perfunctory requirement that lenders produce data on the ethnicity and gender of applicants, as has been required for a decade for home lending.

And no sunshine is required as to the ethnicity and gender composition of top managements, despite two recent Federal Reserve studies documenting the positive correlation between diversity and sound lending practices.

Sen. Gramm, just moments after his stunning congressional victory, complained that further revisions would be needed from the next Congress. Similarly, critics of the modernization legislation might consider (especially if there is a change in congressional leadership after the 2000 elections) the "New Millennium" anti-redlining provisions [introduced by Rep. Barbara Lee] and passed by the House Banking Committee but excluded from floor consideration by the Republican-led Rules Committee.

These provisions, many of which have been voluntarily embraced by some large California banks, are meant to ensure that Dr. Martin Luther King Jr.'s "I Have a Dream" level playing field is embraced by all types of financial institutions.

The first proposed "New Millennium" provision would require hybrid financial institutions to have an overall CRA plan for banking, securities, and insurance. Such an integration could easily triple the present CRA commitments.

The second provision could be to broaden Sen. Gramm's community sunshine provisions to include key financial data such as details on diversity at all levels of management, specifics on inner-city philanthropic investments and vendor contracts, the relationship of top-executive compensation to philanthropic investments, and a mandate that all business lending be subject to the same ethnic and data reporting required for all home lending. We are proud to say that many of these suggested provisions have been profitably adopted by numerous large California banks.

A third provision might be to require the Department of Justice to conduct, in its reviews of giant mergers, a comprehensive fair-lending review. Giant mergers such as Deutsche Bank's acquisition of Bankers Trust Corp. of New York now escape any type of fair-lending scrutiny - not even a perfunctory Federal Reserve hearing.

A related provision would encourage the Federal Reserve, given its new and sweeping lending powers, to automatically use ethnic data as well as census tract data (which often hides ethnic discrimination) in determining a financial institution's CRA rating and fitness for merger approval.

A fifth provision would end the practice of "rubber-stamp" CRA ratings and instead create competition for CRA leadership. All of the top 50 banks receive a satisfactory or better CRA rating. Competition could be created by requiring each regulator to grade on a "curve" and permit a maximum of 10% outstanding ratings and 70% satisfactory. Thus, instead of no large banks receiving a "needs to improve," 20% might.

This would subject the last group to further scrutiny before a merger could be approved under the new legislation. Such a graduated rating system could also reward the top 10% for their leadership by expediting their mergers.

An additional provision for helping to rebuild the inner city would be to minimize CRA and other regulatory paperwork for small banks while maintaining effective scrutiny. This could be accomplished by returning to the practice of CRA exams every two years (as opposed to the four to five years for small banks under the new legislation), but minimizing paperwork if the bank has a joint CRA plan with community groups.

In assessing the likelihood of these provisions' being enacted in the next decade, consider the actions of our last Republican President. In 1989, despite bitter banker opposition, President Bush signed into law the then highly controversial home lending racial profiling requirement [for the Home Mortgage Disclosure Act] that has helped a racial divide and spurred unprecedented economic growth by creating millions of homeowners. With a new Congress committed to ending redlining, we can expect far more sweeping changes to promote economic growth in our inner cities. Ms. Lee is a Democratic representative from California. Mr. Gamboa is executive director of the Greenling Institute in San Francisco

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