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By ELIZABETH HAYES

Staff Reporter

Congress passed the Community Reinvestment Act in 1977 to encourage lending in low-income areas, but it has been difficult, if not impossible, to determine how much has been lent and to whom.

Four federal agencies regulate banks for compliance with the act, but there is no central clearinghouse tracking CRA loans, said Janis Smith, spokeswoman for one of the agencies, the Comptroller of the Currency. Instead, oversight functions largely have fallen on the shoulders of community advocacy groups like the San Francisco-based Greenlining Institute.

Indeed, Smith and representatives of both the Federal Reserve and the Federal Deposit Insurance Corp. referred questions on CRA lending in Los Angeles to the Greenlining Institute.

"What CRA requires banks to do is serve all the communities within their geographic area. That doesn't mean any particular kind of loan or service," Smith said. "The way you determine if (banks) are complying with CRA, is to look at all of it, (and ensure) that loans are not made in one pocket or area."

Amid pressure from minority advocacy groups, however, the Community Reinvestment Act regulations were revised in 1995 to require larger financial institutions to report the geographic location and income categories of their small-business and farm loans.

That pressure, according to Bob Gnaizda, general counsel for the Greenlining Institute, has resulted in major California-based financial institutions committing $314 billion over the 10-year period from 1994 to 2004 in CRA loans for mortgage lending, small business loans and economic development. Of that, $190 billion are California commitments, and $63 billion of that is in L.A. County, he said.

But community groups won't be satisfied until regulators change a controversial provision prohibiting banks from gathering data on small-business and consumer lending by race, ethnicity or gender. The rule was intended to protect consumers against discrimination, but open reporting of such data would likely expand minorities' access to credit, said Alan Fisher, executive director of the California Reinvestment Committee.

Without tracking, it is hard to prove that loans are being made to minority communities, said Jorge C. Corralejo, who is on the board of the Latin Business Association in Los Angeles.

Of the $314 billion commitments under CRA, no one knows exactly how much of it went to minorities, Gnaizda said.

"This (rule) might be changed in a few months," Gnaizda said.

In January, members of the Greenlining Coalition, which is affiliated with the Greenlining Institute, met with Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Robert Rubin and Comptroller of the Currency Eugene Ludwig to push for changes to the rule.

George Bivins, chairman of the Black Business Association of L.A., said he is scheduled to meet this week with Attorney General Janet Reno on the issue. Among other things, Bivins wants the federal rating system for compliance with CRA changed to better reflect the lending institution's loan performance.

"The federal government gives a satisfactory rating, even to a bank that's totally out of bounds," Bivins said.

Somewhere between 97 percent and 99 percent of financial institutions receive either satisfactory or outstanding ratings, Fisher said.

"From our point of view, that means there's not much value in the rating. If the difference is an A or B, who's not doing a good job?" Fisher said. "The ratings have become a joke."

FDIC spokesman David Barr dismissed critics, saying regulators do review performance.

"Those who say the regulators are too lenient are looking from the outside," he said.

The banks that have made the largest CRA-related commitments are: Bank of America, Wells Fargo Bank, Union Bank of California, Home Savings of America, Washington Mutual and Comerica Bank. Most of the commitments from banks occurred during the time of bank mergers, when regulators look closely at their CRA activities. Gnaizda said the Greenlining Institute audits banks semi-annually to make sure they are making good on their commitments.

He estimates 40 percent of the $63 billion coming Los Angeles County's way is in the form of small-business loans, 45 percent relates to home lending and the remainder to macro-economic development projects, such as revitalizing a whole neighborhood or financing a shopping mall.

"They (banks) are anxious to penetrate (minority) markets," Corralejo said. "It makes good economic sense. How can you avoid this enormous market?"

Between January 1996 and September 1997, Wells Fargo made $1.7 billion in loans in the L.A. area under CRA, said Brenda Ross-Dulan, vice president of corporate community development in the bank's L.A. office. Loan officers' incentive compensation is tied to underwriting CRA loans as well as other loans, she said.

"As a for-profit entity, we have an obligation to shareholders, but there's a way to do CRA lending profitably," Ross-Dulan said. "Our strategy on the lending side is we try to understand the lending needs in communities in which we operate, and work with community groups."

Community advocates say capital investment in the inner-city is a cost-effective way to fight crime and other social problems.

"Our goal is to see a community that certainly has low crime rates because it has high business opportunities," said Mark Whitlock, executive director of FAME Renaissance, the business and economic development program at the First A.M.E. Church, Los Angeles. "In housing, unfortunately, there is still a great disparity in home ownership in South Central in African American families."

Business loans are also important, he said.

"Businesses are not in South Central L.A. The reason is the capital is not here," Whitlock said. "It's time for banks to take a risk and invest in a new market. If we're willing to bail out Asia, let's bail in resources in South Central L.A."

Gelly Borromeo of Diamond Bar, who is on the Greenlining Institute board, said she doesn't believe the CRA's impact has been significant yet, but "we've made strides."

"It's not so much a dollar commitment, but a commitment of continued economic development," Borromeo said.

Gnaizda said the amount flowing to L.A. would be tripled if securities firms, insurance companies and mortgage brokers also were obligated to comply with the Community Reinvestment Act.

Merrill Lynch has voluntarily committed about $40 million to L.A. in the form of mortgage lending, small-business counseling, lending and financing, and philanthropic gifts for job training and literacy, according to Garrett Gin, community development manager for Merrill Lynch.

"Tapping into emerging markets the Latino, Pacific, African American that have traditionally been underserved by financial services firms sounds like a good opportunity," Gin said.

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