Magazine article American Banker

Laware: CRA Reform Unlikely to Please Bankers

Magazine article American Banker

Laware: CRA Reform Unlikely to Please Bankers

Article excerpt

WASHINGTON -- Banks are unlikely to be happy with reform of the Community Reinvestment Act, a top Federal Reserve official warned Thursday.

While few elements of the reform have been agreed upon, growing talk of quantifiable measures and added documentation have reignited some fears about the scope of the effort.

"The direction CRA reform seems to be going is probably not what banks have in mind," Fed governor John P. Laware said.

Two-Tiered System Welcomed

While much of the industry is pleased by indications that regulators favor a two-tiered system -- with less burden for smaller lenders -- many remain concerned that heavy emphasis on where and to whom loans are made will lead to government allocation of credit. In addition, they fear mandates for greater record-keeping on many types of loans, including small-business and consumer.

"The concern with CRA reform is that if you're not careful, you will either end up with credit allocation or set up a slippery slope to credit allocation," said Ed Yingling, chief lobbyist of the American Bankers Association.

"And we would find it terribly ironic if what was set up to reduce paperwork ended up creating more of it," he added.

The President has given bank regulators until Jan. 1 to reform the law so that it focuses on loans made and reduces unnecessary documentation. After holding public hearings around the country in August and September, the bank regulators have yet to come up with a proposal.

"No decisions have really been made," Grifford Garwood, director of the Fed's consumer affairs programs, told the Fed's Consumer Advisory Council Thursday. …

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