The Good News: Banks Reinvesting in Baltimore Communities

March 07, 1993|By VINCENT P. QUAYLE

Baltimore and Baltimoreans desperately need some goo news, as do the stalwart residents of many of America's older cities. For longer than any of us wish to remember, the gloom has been all too pervasive and enduring.

In 1977, a law was passed in Washington, officially called the Community Reinvestment Act, and commonly known as "CRA." Congress passed CRA because, despite the billions of dollars of federal programs aimed at restoring neighborhoods, many older communities, particularly in the East and Midwest, continued to deteriorate. So the government turned to private industry, especially the banks, and said, in effect: "You solve it!"

Congress then told the banks' regulators, the Federal Reserve Bank and its partners (the Federal Home Loan Bank Board, the Office of Thrift Supervision and the Office of the Currency) to see that the nation's lending community contributes to community redevelopment.

Of course, the regulators were not happy at all. They saw their job as protecting the "safety and soundness" of the nation's banking system. The early CRA regulations were vague and harmless enough that the banks and regulators could pretty much wink at each other.

Years passed. Congress grew more impatient, and, as things continued to deteriorate, pressure built from communities and neighborhoods around the nation that forced Congress to take a further step. The result was a grading system. Each bank and savings and loan association would be given a grade for its "community investment activities:" 1 for "outstanding', 2 for "satisfactory", 3 for "needs improvement", and 4 for "failure".

The banks were upset. Realizing that the public would not understand the grading system and confuse the "safety and soundness" role of the regulators with this silly rating system for CRA (and themselves not realizing what CRA was all about), the banks started demanding help -- in the form of specific guidelines for the ratings -- from the regulators. Of course, the regulators had not been quite sure what they were expecting, because they themselves were never enthusiastic about the CRA legislation.

In 1989, the regulators began defining what was acceptable CRA activity, and the bankers began scrambling to convince the regulators that this is exactly what their banks have been doing all along.

The first months under the new regulations were not without humor. More bank presidents and top executives visited our office in 1989 than I knew existed. I remember teasing one of the biggest and most conservative with: "How come it has taken you years to come see us?" I have been invited to so many banking functions that my wife had to take me out and buy me a suit.

By now every Maryland bank and savings and loan has been examined and rated at least once by the federal regulators. The regulators were kind the first time around, but all the banks aspire to the "outstanding" rating in the next exam both as a matter of pride and as concern that the public view them as the best. To achieve these results, virtually every banking CEO has passed the word through the ranks that CRA is to be taken seriously and every employee is to "think and act" CRA.

Given the devastating effect of the last 12 years on our older communities, when asked why I am so hopeful, I respond "because of what has taken place in corporate Maryland, particularly the banking community." I have seen multiple seeds planted and take root which offer great hope for Baltimore and its neighborhoods. Daily new ideas are being offered and acted on, all because of the new interaction between bankers at every level and the neighborhoods.

Three years ago, several local banks introduced an "acquisition-rehab mortgage" which allows homebuyers to purchase and rehab a house with a single loan. This program offers great promise to our older communities. Dozens of partnerships have developed between banks and non-profit housing providers to prepare local residents for homeownership and guide them through the intricate steps of buying an older home. Bankers are asking the United Way, local foundations and their own foundations to support their new neighborhood investment activities. Baltimore's banks have created a round table of CRA officers to share ideas and activities in the neighborhoods.

One of Maryland's largest banks recently gave a party for its employees who live or work in Hamilton. The president explained the bank's new initiatives in Hamilton's diverse neighborhoods and encouraged the workers to involve themselves in the community's efforts to excel: the PTAs, neighborhood groups, recreation programs and volunteer associations.

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