Magazine article American Banker

Clinton Plan Would Deepen Banks' Problems

Magazine article American Banker

Clinton Plan Would Deepen Banks' Problems

Article excerpt

When a presidential candidate ahead in the polls volunteers that he intends to create a "different sort of banking system" and that "a certain percentage of the bank assets of this country have to be devoted to community banking," it's time to sit up and take notice.

That is exactly what Gov. Bill Clinton recently told a group of reporters in Little Rock, Ark.

"What I propose," he said, "is to create one of those [community development] banks in every urban area of any size and every poor rural area."

Model Program in Chicago

Gov. Clinton said he had in mind as a model South Shore Bank in Chicago and its Good Faith Fund, which he said was patterned after a loan program by a bank in Bangladesh for low-income people.

The implications of Gov. Clinton's comments are sobering.

Without so much as a nod toward the need for regulatory relief or for a more efficient banking structure as part of a modern, integrated financial services system (the model of all industrialized nations except the United States), the Democratic candidate made clear that his preference instead is to rely on greatly expanded credit allocation through a nationwide system of federally mandated lending - in other words, the model of a developing country.

System Invites Abuse

How these facilities would be staffed and supervised to avoid a national lending scandal that could dwarf the S&L debacle is a subject the governor did not address.

While it is true that what is said by a presidential aspirant during a campaign is often revised after the election, Gov. …

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