Community Loan Bill May Rival Clinton Plan

By Garsson, Robert M. | American Banker, July 26, 1993 | Go to article overview

Community Loan Bill May Rival Clinton Plan


Garsson, Robert M., American Banker


WASHINGTON -- A politically potent group of House Banking Committee members is sponsoring a community development lending bill that would provide more financial incentives for banks than President Clinton's program.

The measure, sponsore by Rep. Floyd Flake, D-N.Y., and Rep. Jim Leach, R-Iowa, appears to have a better-than-even chance of prevailing over the President's approach.

Six Democrats, including four minority legislators, have signed on as co-sponsors. If all 20 Republicans back the bill, it would have a bare majority when the full committee votes, even if no other Democrat signs on.

Other Influential Backers

In addition to Rep. Flake and Rep. Leach, the bill's sponsors include a number of influential Banking Committee members, among them Rep. Barney Frank, D-Mass., and Rep. Thomas Ridge, R-Pa.

"That's a very potent combination," Edward L. Yingling, chief lobbyist for the American Bankers Association, said of the coalition. "You can see the influence of the black caucus and the impact of the Republicans. It's something we would take very seriously."

The Flake-Leach package would make commercial banks eligible for funding if they want to start or expand a community development unit. In addition, it would divert half the money in the bill to the Bank Enterprise Act, which awards banks a rebate on deposit insurance premiums if they lend in low-income areas.

|Safe-Harbor' Provision

Another section of the bill would give commercial banks with a good CRA record a "safe harbor" that would shield them from CRA protests. In addition, investment in a community development financial institution would count as a factor in a bank's CRA evaluation.

The bill also gives community groups an opportunity to challenge a bank's lending record before it is rated under the Community Reinvestment Act.

It directs regulators to adopt a "performance-based" approach to CRA, a step President Clinton took when he announced his community development bank program.

Mixed Emotions?

Bankers are likely to have mixed feelings about the Flake initiative, which was introduced as a bill Thursday evening. …

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