McCollum's Initiatives on the Right Track
Isaac, William M., American Banker
Bill McCollum has been for quite some time a bright light on the House Banking Committee. He has recently proposed two initiatives that deserve a great deal of attention from the banking industry.
The first is a significant reform of the Community Reinvestment Act and the Equal Credit Opportunity Act.
The regulators, in Rep. McCollum's view, have gone far beyond the CRA's intended purpose of proscribing redlining. They have imposed lending quotas and created significant reporting burdens. They have allowed community activists to use protests of bank expansion applications to force banks to commit funds to projects favored by the protesting groups.
Rep. McCollum would turn the CRA into a disclosure law. Depository institutions would be required to make available to the public a written description of their efforts to enhance the availability of credit in their communities. The regulators' authority would be confined to ensuring the accuracy of the disclosures.
Rep. McCollum opposes redlining, which occurs when a financial institution refuses to make loans in certain neighborhoods due to their racial or ethnic makeup. He would address that issue by adding redlining to the list of prohibited activities under the Equal Credit Opportunity and Fair Housing Acts.
The Equal Credit Opportunity Act has subjected banks to yet another regulator, the Department of Justice. Rep. McCollum's bill would limit the attorney general's authority to bring cases to when there is a referral from the bank's primary regulator.
Finally, the regulators and the Justice Department have been inappropriately using a statistical technique called "regression analysis" to show lending discrimination. Rep. McCollum would confine the use of statistical analysis to those cases in which there is evidence of intentional discrimination.
Banks are less likely to applaud Rep. McCollum's second initiative. It is his proposal to resolve the looming insurance premium disparity between banks and thrifts, which would:
* Spread across all banks and thrifts the cost of servicing the Finance Corp. bonds issued by the old Federal Savings and Loan Insurance Corp.
* Make the Resolution Trust Corp.'s funds available to cover all losses on thrift failures until the Savings Association Insurance Fund is recapitalized. …