Rules Sought to Boost Lending to Minorities

By 1993, The Washington Post | St Louis Post-Dispatch (MO), December 9, 1993 | Go to article overview

Rules Sought to Boost Lending to Minorities


1993, The Washington Post, St Louis Post-Dispatch (MO)


Federal banking regulators have proposed rules that would allow them to punish banks that do not make loans or open branches in poor and minority neighborhoods.

Made public on Wednesday, the new regulations - which can be implemented without congressional action - would grade banks on their lending, service and investment in low-income neighborhoods.

Going beyond current rules that focus only on home mortgage lending, the regulators would require banks to disclose their records on consumer and small business loans as well.

Banks that get poor grades for their performance could be fined or ordered to make improvements, according to Comptroller of the Currency Eugene A. Ludwig, principal author of the plan.

Currently, the most severe step that regulators can take is to turn down a bank's application to open new branches, make an acquisition or take some other step that requires government approval.

Under the new scheme, regulators would operate on the principle that banks ought to provide the same level of services in disadvantaged areas as in more affluent neighborhoods.

In other words, a bank that makes 25 percent of all the loans made in a metropolitan area would be expected to provide 25 percent of the loans made in that area's distressed inner city neighborhoods.

Treasury Secretary Lloyd Bentsen said at a briefing, "The only thing that ought to matter on a loan application is whether you can pay it back, not where you live." The goal, he said, "is to make credit more readily available for small businesses, small farms and in distressed areas of our country."

The regulatory plan won the immediate endorsement of both community lending activists, who cheered the tougher enforcement of laws against discrimination in lending, and bankers, who applauded steps to simplify regulation. …

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Rules Sought to Boost Lending to Minorities
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