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Anti-Discrimination Provision Restored

June 20, 1991

WASHINGTON (AP) _ Urged on by busloads of community activists, the House Banking Committee voted 40-12 Thursday to reinstate the law protecting poor neighborhoods from discrimination by banks.

The vote by the 52-member committee reverses a decision by its 36-member subcommittee on financial institutions, which last month decided to exempt 80 percent of the nation’s banks from the 1977 Community Reinvestment Act.

Consumer groups and organizations representing poor people had reacted with outrage to the subcommittee vote on an amendment sponsored by Rep. Paul Kanjorski, D-Pa.

In response, the Association of Community Organizations for Reform Now, or ACORN, bused poor people to Washington from New York, Chicago and St. Louis. They lined up outside the committee’s hearing room in the early morning hours, displacing many financial industry lobbyists who usually make up the audience.

″They finally learned that the people do care,″ said Danita Lowe, an ACORN member from St. Louis.

However, as a price for reversal, advocates of the Community Reinvestment Act gave up an extension of the law, which the subcommittee also had adopted.

That provision, sponsored by Rep. Joseph P. Kennedy, D-Mass., would have required that banks receiving new authority to branch across state lines or to affiliate with securities firms have at least a satisfactory record of lending to low- and middle-income neighborhoods.

Kanjorski had argued that the community lending law imposed an expensive paperwork burden on small banks and that enforcement of the law should be focused on large urban banks.

His opponents pointed to studies showing that regulators assign the rare failing grades on community lending to smaller banks.

″The great burden placed on banks is a sham. The fundamental reality is that the burden is placed on the poor, the burden is placed on the working people and the burden is going to continue to be placed on their shoulders as a result of the deal that was cut here today,″ Kennedy said.

He said he would attempt to reinstate his community lending provision when the banking legislation reaches the House floor.

Earlier Thursday, the banking committee voted to force regulators to close weak banks before they slip into insolvency.

The measure, adopted by voice vote, establishes a trigger that would force weak but still solvent institutions to either improve or close. Ten months after the trigger, weak institutions would face a ″drop dead date″ if they had not started to recover.

The committee rejected, 28-21, an amendment by Rep. John LaFalce, D-N.Y., to make early closure optional for regulators until mid-1993. He said early closure could force the costly bailout of banks capable of recovering.

Proponents of forced early closure, however, said regulators have abused their discretion, particularly during the savings and loan crisis of the 1980s.

The committee has three more sessions scheduled next week and hopes to move a bill to the House floor before the Fourth of July recess, but it has made little progress on the most divisive issues before it.

On Thursday, it postponed action on three separate proposals to streamline the federal regulatory bureaucracy after Rep. Doug Barnard, D-Ga., said the Federal Reserve had enough votes on the committee to block any regulatory changes it did not like.

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