NYT, pg1: U.S. Set to Alter Rules for Banks Lending to Poor

U.S. Set to Alter Rules for Banks Lending to Poor
By DAVID W. CHEN

Published: October 20, 2004


Federal banking regulators in the Bush administration are poised to limit the nation's primary law requiring small banks to serve low-income residents in their own neighborhoods through housing investments and development projects.

Since 1977, the Community Reinvestment Act has required banks with assets of more than $250 million to satisfy stringent tests gauging their banking services to low- and moderate-income residents. Because of that obligation, housing groups say, banks have channeled $1.5 trillion into housing, medical clinics and other projects. But many small banks have complained about being sapped by the time and money needed to comply, and also of being overmatched by the resources of larger banks.

So in recent months, two of the nation's four bank regulators - the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, both headed by Bush appointees - have published formal proposals seeking to reduce the number of banks subject to the law. Under the proposal, only banks with $1 billion in assets would have to comply, meaning that 1,100 smaller banks would be subject to less scrutiny. The thrift office has already put its proposal into effect; the F.D.I.C. is a few months away from acting, although today is the deadline for public comment on the plan.

The two other bank regulators - the Office of the Comptroller of the Currency and the Federal Reserve Board - appear inclined to loosen their rules as well.

The F.D.I.C. proposal alone would mean that the number of banks required to comply with the toughest provisions of the law would drop to 227 from 1,138. In New York, the number is estimated to decline to 20 out of 81; in New Jersey, 12 out of 76. Some states, like Minnesota, New Mexico, Idaho and West Virginia, are projected to drop to zero....


http://www.nytimes.com/2004/10/20/nyregion/20bank.html

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today is astounding. Between this bush* administration and the corporations, we most surely will end up like a third world country, no jobs, no educational opportunities, no help for hungry and homeless people, just an extremely cheap labor force serving those that feel that they are 'entitled' to America's opportunites while everyone else does without.

We're only going to require federally chartered...and insured...institutions to lend money to people who don't really need it.

And to hell with those pesky poor folks!

FDR= New Deal
JFK= New Frontier
Dubya= New Aristocracy

I don't see how this is bad. Is it our right to make small banks engage in high risk loans?

It's our right to take the charter away if they don't act responsibly. If they don't like it they can get into a different business.

The answer is yes.

I don't see how requireing banks to make high risk loans is responsible. Please explain this to me.
I understand that they are chartered, (regulated) and that reguation is neccessary in that industry, but forcing risky lending practices from "smaller" banks seems like a bad idea to me. Many of these banks are local or regional and can't afford to take the risks that a large bank can.

"Small banks" have more than $250 million? The BFEE crooks exclusively go for banks, or the late S&Ls, with MORE than $250 million. Like Willie Sutton said, "It's where the money is."

BTW: Welcome to DU. Where ya been all these years?

$250 million is not that much for a bank. They have to keep so much on hand (I honestly don't know how much) for withdrawals obviously, and with the escalating price of housing the loan dollars don't go as far.
I'm no banker, and if you guys know something that I don't I'll listen, but this doesn't seem like that bad of an idea to me. I also think that the numbers are wrong or at the very least misleading. I don't believe that that are no banks in MN , NM, ID, and WV that would have to comply. Aren't there Citizens or BOA's in these states. (The answer is yes)

...the taxpayers, for an insurance bailout. (Remember Neil Bush and Silverado S&L?)

That's why thrifts are publicly chartered. And that is the rationale for serving all of the public...not just the wealthy.

But addressing your question: Why is this bad ?
This just goes further towards permenantly disenfranchising those who are economically struggling, ( possibly 1/3rd or more American citizens ).

If anything, businesses need to be more regulated and compelled to act responsibly.
I will go furhter in saying corporations are the biggest threat to democracy in America
and this is symptomatic of the Bush Administrations policy of enacting laws that benefit them to the detriment of the interests of the common person.

I'm sorry but I don't understand you post. How does increasing the financial liability of poor people help?
Amercians are in so much debt it is beyond comprehension. "Economically struggling" (which is me) people don't need more loans, we need to owe less.

I see it as greater empowerment and opportunity.
So who are you? Be honest.

When you say who am I, I assume that you mean what am I, because my name and address are irrelevent. I suppose who I am depends on which side of the telescope you are looking through. I think that I am a politically minded individual who doesn't take anything at face value. I will be liberal on some issues and conservative on others. I am registered as an independent. I don't think that trying to reign in the increasing debt levels of lower-income individuals is a conspiracy of "Neocon's".
I suppose I don't know enough about this specific piece of legislation to be overly critical and I don't think that I am being overly critical. I just think that it is being blown way out of proportion right here right now. I mean we are speculating that it is another instance of the current administration to keep the little guy down, and almost all of us don't even understand what the change will actually do.

1. If the Bush administration were at all interested in reducing the number of poor people mired in debt, it would focus on the practice of payday loans.

2. If poor people can't get loans through banks, they will have to turn to pawn shops and pay-day loan outfits, as well as illegal loan sharks.

3. This rule change is not aimed just at poor people, but at anyone who might want to provide a service for poor people. Why should a medical clinic suddenly be unable to procur loans? Or a small businessperson who wants to be able to put a taco stand in?

I haven't read enough about these new rules to have an educated opinion, but I totally agree with you about high-interest payday loans. The Bible says that we are not to take advantage of the poor. Payday loans are nothing more than bleeding poor people to enrich those who have the ready cash to take advantage of others' misfortune.

The practice of payday loans unfortunate, but lets not forget that the people who take these types of loans (like me) out can't get loans because they have bad credit scores, or no income (although if they had a good credit score they could still get a loan without a job).

Your insinuation that medical clinics need loans to run I think is misleading. Most of the funding for local low income health clinics comes from , believe it or not, health insurance companies and the Federal Government (which is increasing the funding by about 7%. Do we need more, the answer is yes, but lets no say that nothing is being done. We just need more to be done. This type of stuff doesn't happen overnight.
As for the small business person, they need to get the credit score in order first, and prove that they will repay loans, then they will get loans.
BTW you don't need to take cheap shots to get my attention, if you have something intelligent to say, I will listen.

but you could use better consumer credit protection from predacious lending practices done by the BANKS that issue credit cards.

Its true that credit cards are very dangerous if not wisely used. I am not advocating for debt, or more opportunities to acquire it. This is a separate issue.

For whar its worth I have a handful of cards, never carry balances, and always pay them off on time. I may not be in great shape financially; I just know credit cards are potentially evil.

I only use them when I know I have the cash on hand or in savings.
I do think more regulation on banks and credit cards are in the public interest.
And again, banks need to be more responsible to the public good.

I never said anything about credit cards, but I do agree with you about them. But making everyone belive that they can afford a $200,000 house is just as bad. Banks home loan practices need to be controlled more, not forced to make bad loans. The poeple who end up defaulting on these loans are the ones who need to be protected. They need the bank to be able to say no.
Did we even ask why this law is being changed, or if there is a better law in the works?

You seemed to be a little flippant, ( which is not necessarly bad ), and I wanted to understand what lay at the base of your responses.

As far as mortages go, most loan officers are bound by certain income to debt ratios on any given deal, so it is in no ones best interest if a 200.000.00 loan goes south.
This is a good way for the lending institution to get audited.

What happens if the economy weakens and the employer upon whom money for hte note depended goes away, or the job is out sourced or any number of other reasons
create a situation for the buyer to get behind on his payments...then a 200,000.00 house is a huge problem. But there are guidelines on lending that don't address this.

There is no substitute for common sense and good judgement - I don't believe a bank is forced to make bad loans either, nor should it. I am so mistrustful of anything the Chimp administration proposes that I won't care how its couched.
I just know thay don't have my best interests in mind.
Its part of his leave no millionare behind system of values.
There is too much bad faith already - starting from the stolen election.

Banks, Corporations, businesses of all types do not exist to serve themselves, they exist to serve people. Not only the people who own them, but the people who clean them as well. Any other position creates a concentration of power at the top that will inevitably bring destruction. If you have nothing, you also have nothing to lose by torching the bank that does not serve everyone.
Conservatism is the dark black, an ideology of fear, hate, ignorance and greed.

Show me where the defaults in dollars are greater in the highly-supervised community development loans.

Myth!

Well in order to see the numbers all you will have to do is to look into the newspaper a the housing costs. Obviously I don't know where you live but in my neck of the woods the housing prices have gone up about 100-170%, some went up much more, some went up a little less. This is largely due to the easy availability of home loans. When everyone (I use the term loosely) can get a loan the price of houses goes up. Which it has. But they went up too much and now housing is becoming unaffordable because of how easy it is to get a loan. Now there are several ways to comb at this, one is to raise interest rates, and nobody wants that. Other ways are more subtle, like making it harder for people who don't have the income to get a house, to get a house. (sorry about that sentence, its ugly)

As far as the number you are asking for a very specific stat to a general remark that I made. I am aware that many lower income people make their payments just fine and they get credit scores to reflect that. And it make sense that highly supervised community development loans wouldn't have unusually high default rates.

Now the real problem with the law could be abuse by lender and realtor's.
Read this, http://www.nhi.org/online/issues/124/WN&V.html
This could be one reason that they are trying to change the current law.

It says smaller banks can now lend to the poor if the rule is changed. Is this a bad thing?
It says Kerry opposes lossening the rules on small banks, so I'm sure he is right, but I can't figure out why.

and the rules are being loosened, resulting in far fewer banks being required to lend to the poor, with some states left with no banks falling under the requirement.

Banks have been required to service a wide range of people in their areas, with the intent of money going back into the community. Too many would prefer to only service the lowest risk customers--loaning to people only when they can prove they don't need the money, as the old joke has it.

Could only have been hatched in the slime-encrusted soul of BushCo

The Community Reinvestment Act required banks to provide "services" to low-income and moderate-income communities where they did business. That doesn't necessarily mean the banks loaned money to "poor folks". Under the CRA, the best we could get for our low-income community from the banks were classes on investment and budgeting *sigh*...they knew how to avoid us (the poor folks) anyway. Can you imagine what kind of success they had in drawing persons from households with an annual income from $2-10K and 1-8 children to those meetings??? it was a cricket-chirping symphony.

...kind of an overdue antidote to white flight?

On a darker note, Carlyle had its best 18 months EVER! :grr:

edit: I see it has been a primary component of revitalization projects:

snip>
But many Democrats, larger banks and rural organizations say the Community Reinvestment Act has arguably been the nation's most significant community revitalization initiative. Before the law, many banks engaged in discriminatory red-lining practices by choosing not make mortgage and business loans to people in poor and predominantly minority neighborhoods. After the law, banks were held accountable to a higher and tougher standard, forcing them to actively pursue lending, investment and other activities in poor areas.

In New York, for instance, the law has been instrumental in financing a Pathmark on 125th Street - the first full-size supermarket in Harlem - and the Harlem USA shopping area, as well as the rehabilitation of hundreds of dilapidated apartments in upper Manhattan, the Lower East Side, the Bronx and Chinatown.

These supporters have accused regulators of acting capriciously in unveiling their proposals, and limiting or even eliminating the public comment period. But they are angriest at what they contend is a broader design to dismiss the housing needs of poor people, pointing to proposed cuts to the Section 8 voucher program.

"It's all part of a strategy," said Senator Paul S. Sarbanes of Maryland, the ranking Democrat on the Banking Committee. "This administration has no commitment to affordable housing."

for people in a community who have no money or any real hope of getting any. Who dreams this shit up? What kind of a service is that?

What next--debtor's prison?

With more than 2 million locked up now, and another several million on parole or probation, many of whom can expect at any given moment to rejoin the merry 2 million on the inside, some might say that we are already deep in debtor prison territory.

So demand will decline and the price of moderately-priced homes should fall.

value. Crapola.

Sermon on the Mount don't they get.

Why is it better to make small banks do this and not large banks? It seems like it would be better to make the large banks offer the loans because they can afford it.
Also, this is awful. What are poor people supposed to do? Really though.