WASHINGTON -- The House today will debate a measure that would crack down on banks and the federal agencies that regulate them in an effort to end mortgage-loan discrimination.
A controversial amendment to an omnibus banking-reform bill would require banks to prove they have reached into minority communities before they would be allowed to expand across state lines.
The amendment -- in response to recent Federal Reserve data showing that financial institutions lend to whites far more often than to minorities -- also would force regulators to conduct more on-site investigations of banks, and lower the investment ratings and impose fines of up to $5,000 a day against banks that discriminate.
The amendment is proposed by Rep. Joseph Kennedy 2nd, D-Mass.
"It's time for Congress to give regulators a wake-up call. Congress must ensure that access to economic opportunity isn't a privilege of where you live or the color of your skin," Kennedy said yesterday.
Banking associations lobbying against the bill criticized it as too costly, impractical and vague.
"I think it would put institutions in a position where they would be forced to go to tremendous extremes in an attempt to placate community groups and regulators" if they wish to operate banks across state lines, said Steve Zeisel, senior counsel for the Consumer Bankers Association.
One of the most controversial portions of the Kennedy amendment would require federal regulators to send "testers" to banks. Testers -- regulators posing as mortgage-loan applicants -- would be sent to prove discrimination in banks.
Such a proposal was rejected by the Federal Reserve several weeks ago as too costly -- possibly as expensive as $1 million, banking officials said.
"It's not well thought out," said Nessa Feddis, senior counsel for the American Bankers Association.
Deepak Bhargava, a lobbyist for the consumer-rights group the Association of Community Organizations for Reform Now, heralded the entire amendment as a landmark in protecting minorities against mortgage-loan discrimination.
Bhargava predicted that the fight on the House floor will be tough, but he predicted the amendment will be approved.