Banks accused of neglecting the inner cities

September 12, 1993|By Los Angeles Daily News

LOS ANGELES -- Banks are not meeting the financial needs of minority neighborhoods, federal officials were told during a hearing on inner-city lending.

The heads of four bank and thrift regulatory agencies were urged Wednesday to strengthen the 1977 Community Reinvestment Act to ensure that banks and thrifts extend credit to poor and minority areas.

"When you talk about CRA, I feel it's nothing but a black hole," said Ben Benavidez, national president of the Mexican-American Political Association.

The Los Angeles meeting was one of several held across the country to determine how to improve the law. President Clinton has made CRA compliance a major issue and asked regulators to come up with recommendations for improving it by the end of the year.

The CRA requires financial institutions to make loans -- or reinvest -- in the areas in which they collect deposits.

Community groups said even though the law has brought some improvement in lending practices, banks continue to make too few inner-city loans. That has prevented low-income and minority residents from securing credit to buy homes and finance businesses, they said.

Eugene Ludwig, who as U.S. comptroller of the currency oversees 3,600 federally chartered banks, said inner cities have suffered because a lack of bank branches in their areas has forced residents to rely on check-cashing services that charge excessive fees.

"It's just an appalling situation. It's very sad," Mr. Ludwig said.

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