COMMUNITY REINVESTMENT ACT

Wednesday, May 5, 1999

CONGRESSIONAL RECORD Wednesday, May 5, 1999 106th Congress, 1st Session

Mr. LEVIN: Mr. President, I rise to speak about the Community Reinvestment Act. The CRA was enacted in 1977 to encourage banks to serve the credit needs of the entire community including low and middle income areas. The obligations that banks owe to the entire community stem from their charters and the public benefits they receive through the Federal Reserve. The CRA is a way to encourage banks to live up to their public obligation. Nationwide the CRA has been recognized as an effective way to increase credit availability in underserved areas. In his testimony before the House Banking Committee in February, Federal Reserve Chairman Greenspan remarked, that the CRA has "very significantly increased the amount of credit in communities" and the changes have been "quite profound." In 1997 alone, almost 2,000 banks and thrifts reported $64 billion in CRA loans, including 525,000 small business loans worth $34 billion; 213,000 small farm loans totaling $11 billion; and 25,000 community development loans totaling $19 billion. Those loans went to affordable housing projects, economic development through financing small businesses or farms, and activities that revitalize or stabilize low or moderate income areas. CRA has also encouraged a dramatic increase in home ownership by low and moderate income individuals. Between 1993 and 1997, private sector conventional home mortgage lending in low and moderate income census tracts increased by 45%.

And the CRA has done so without forcing a large paperwork burden onto banks and without forcing banks to make bad loans. During the same House hearing, Chairman Greenspan alluded to the mutual benefit of the CRA to consumers and banks when he said, "CRA has helped financial institutions to discover new markets that may have been underserved before."

While there are countless examples of the Act's effectiveness in encouraging lending in underserved areas all over the country. Here's some examples from Michigan. Lake Osceola State Bank in Baldwin just completed their CRA exam under the reformed 1996 regulations. They said it was not a burden, and they received a rating of outstanding. Under the terms of S. 900, the bill before us today, Lake Osceola State Bank would qualify for an exemption from the CRA because of their size and location, but the bank has told my office that they are not seeking a CRA exemption. To the contrary, they are justifiably proud of the contributions they are making to community development in the Baldwin area.

We Care, Inc. is a small non-profit that rehabilitates a few houses a year in Detroit's Van Dyke and 7 Mile area. They say the CRA and National City Bank have been their life-line for credit.

Northwest Detroit Neighborhood Development, Inc. is yet another nonprofit organization that has contacted me in support of the CRA. They praised the National Bank of Detroit and Comerica for extending credit to them and supporting their mission of homebuilding in the Brightmore area of Detroit.

The Local Initiatives Support Corporation (LISC), a nationally prominent community development group that operates in five Michigan cities, considers the CRA critical to their efforts. In an effort to boost their CRA scores, lenders have sought out groups like LISC and the Neighborhood Reinvestment Corporation to develop "shared risk" loan pools that offer financing to first time home buyers. Over the past 5 years, more than 400 mortgages were written in six Michigan cities. This has generated over $16 million in direct public and private investment in central city neighborhoods. According to LISC, without the CRA "these types of programs would not have been established." Other Michigan community development groups like U- SNAP-BAC, SWAN and New Hope also rely on loans encouraged by the CRA.

Many Michigan mayors have expressed their support for the CRA. They praise the CRA for encouraging private business investment and creating new jobs and businesses in theircommunities. In addition, money from federal grants is leveraged to obtain millions of dollars in private investment. There are twelve mayors from all over Michigan on this letter from the U.S. Conference of Mayors supporting the CRA, and I ask unanimous consent to include the letter in the record at the end of my statement.

I oppose the provisions weakening the CRA included in S.900, a bill intended to modernize the financial sector of our economy. Both small and large banks in Michigan have received outstanding CRA ratings. The community groups and nonprofits make great use of the resources which are made available through the CRA. The federal independent agency that oversees the nation's banking system says its not onerous and has been very successful. Therefore, I will not support a bill that weakens a program that has been so important to community development efforts in Michigan and nationally.