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S. HRG . 100-905

PROVISIONS AIMED AT STRENGTHENING THE

HEARINGS
BEFORE THE

COMMITTEE ON

BANKING, HOUSING , AND URBAN AFFAIRS
ONE HUNDREDTH CONGRESS
SECOND SESSION
ON

COMMUNITY REINVESTMENT, CHECK CASHING , LIFELINE BANKING

SEPTEMBER 8 AND 9, 1988

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

U.S. GOVERNMENT PRINTING OFFICE

90-163

WASHINGTON : 1988
For sale by the Superintendent of Documents, Congressional Sales Office

→

了

1

COMMITTEE ON BANKING , HOUSING, AND URBAN AFFAIRS
1

1

( II )
1

1

CONTENTS

CO
00
voor

THURSDAY, SEPTEMBER 8, 1988
Page

Opening statement of Chairman Proxmire ........

........................................

Robert L. Clarke, Comptroller, Comptroller of the Currency, Washington, DC ..

7

9

............................

24

29
44
125

135

154

177

( III )

IV
Page

John M.Kolesar, president and CEO , AmeriTrust Development Bank, Cleve
land, OH ...

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?

FRIDAY, SEPTEMBER 9, 1988
Opening statement of Chairman Proxmire.........
Opening statements of:

303

304
305
349
351

WITNESSES
Jonathan Brown, BankWatch, Washington , DC ........

1

305V
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309
312

7

345
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V

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
Page

“ New Initiatives in Banking Regulation : 1988 ,” by Robert L. Clarke, Comp
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357
457
384

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1

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PROVISIONS AIMED AT STRENGTHENING THE

THURSDAY, SEPTEMBER 8, 1988
U.S. SENATE,

COMMITTEE ON BANKING , HOUSING , AND URBAN AFFAIRS,

OPENING STATEMENT OF CHAIRMAN PROXMIRE

The CHAIRMAN. The committee will come to order.

( 1)

2

1977 worried that mybill would lead to Government- imposed credit
allocation . I assured them then - and I quote what I said :

1

1

3

STATEMENT OF THE HONORABLE JOHN HEINZ

BEFORE THE COMMITTEE ON BANKING , HOUSING AND URBAN AFFAIRS

MR . CHAIRMAN ,

I JOIN YOU IN WELCOMING OUR DISTINGUISHED WITNESSES

AS THIS COMMITTEE EXAMINES AMENDMENTS TO THE COMMUNITY

REINVESTMENT ACT AND OTHER CONSUMER-RELATED PROVISIONS PROPOSED
RECENTLY BY THE HOUSE BANKING COMMITTEE IN H.R.

5094 .

LAST MARCH , THIS COMMITTEE INVITED COMMUNITY GROUPS TO EVALUATE
THE PERFORMANCE OF THE FEDERAL BANKING AGENCIES ' ENFORCEMENT OF
THE COMMUNITY REINVESTMENT ACT ( THE " CRA " ) . THESE GROUPS WERE
TOUGH GRADERS .

EACH OF THE BANK REGULATORS WERE GIVEN FAILING

GRADES .

THE COMMUNITY GROUPS ALSO COMPLAINED THAT THE BANK REGULATORS
WERE EASY GRADERS WHEN IT CAME TO TESTING THE BANKING INDUSTRY'S
COMPLIANCE WITH THE CRA .

THESE GROUPS NOTED THAT 98 %

OF ALL

BANKS RECEIVE PASSING GRADES WHEN , IN FACT , THE PERFORMANCE OF
.

MANY BANKS SIMPLY DID NOT MEASURE

SCHOOL

IS NOW BACK

IN SESSION .

UP .

THE SCHOOL SUPERVISORS ON THE

HOUSE BANKING COMMITTEE HAVE PROPOSED A BRAND NEW CURRICULUM ,
WITH LOTS OF REMEDIAL COURSES , A TOUGHER GRADING SYSTEM AND
MANDATORY EXAMINATIONS EVERY TWO YEARS .

MOST IMPORTANTLY , UNDER

THESE NEW RULES , THE BANKS WILL NOT BE PERMITTED TO ENGAGE IN
EXTRA - CURRICULAR ACTIVITIES , SUCH AS STARTING A SECURITIES
BUSINESS , UNLESS THEY GET BETTER THAN AVERAGE GRADES ON THEIR CRA
EXAMS .

1

4

THE BANKING INDUSTRY SAYS THAT THE NEW CURRICULUM IS TOO TOUGH .
THEY DON'T MIND HAVING TO PASS A CRA EXAM , BUT FEEL THAT THE
GRADING CURVE IS TOO HIGH .
BE AT THE HEAD OF THE CLASS .

THEY SAY THAT NOT EVERY STUDENT CAN
IF THEY WORK HARD AND PASS THE CRA

EXAM , THEY WANT TO BE ABLE TO ENJOY THE OTHER ACTIVITIES
AVAILABLE UNDER GLASS - STEAGALL REFORM .

THE BANKS ALSO WANT TO DO AWAY WITH THE " POP - QUIZ "

SYSTEM .

THEY

SAY THAT IF THEY PASS THE CRA EXAM , THAT IT IS UNFAIR TO BE RE
GRADED EVERY TIME THEY APPLY TO ENGAGE IN AN EXTRA - CURRICULAR
ACTIVITY .

GOOD GRADES , IN THEIR VIEW I, SHOULD BE REWARDED WITH

THE FREEDOM TO DO OTHER THINGS WITHOUT CHALLENGE , UNTIL THE NEXT
EXAM .

MR . CHAIRMAN , THE GOALS OF THE CRA , ENACTED
REMAIN IMPORTANT TODAY .

TEN YEARS AGO ,

NO DOUBT , THE CURRICULUM SHOULD BE RE

EXAMINED AND , IF WARRANTED , UPDATED TO REFLECT CHANGES OVER THE
PAST THE DECADE .

HOWEVER , AS WE EXAMINE THE HOUSE PROPOSAL , WE SHOULD BEAR IN MIND
THAT CRA IS NOT THE ONLY COURSE IN OUR SCHOOL SYSTEM .

WE WANT

OUR FINANCIAL INSTITUTIONS TO BE WELL - ROUNDED , RESPONSIBLE , AND

OF COURSE , HEALTHY AND PRODUCTIVE MEMBERS OF THE FINANCIAL
SERVICE COMMUNITY .

THE NEW EXTRA - CURRICULAR ACTIVITIES AVAILABLE

TO BANKS ARE IMPORTANT TO THEIR DEVELOPMENT .

THESE ACTIVITIES

SHOULD NOT BE PUT OUT OF THE REACH OF THOSE BANKS THAT ADEQUATELY
MEET THEIR CRA RESPONSIBILITIES .

5

OPENING STATEMENT OF SENATOR GARN

Senator GARN. Mr. Chairman, as you mentioned, today the com
mittee starts 2 days of hearings on the consumer provisions of the

banking bill passed by the House Banking Committee.

6

They should only be passed as a part of a larger package in which
all important banking issues are addressed.

OPENING STATEMENT OF SENATOR BOND

Senator BOND. Thank you , Mr. Chairman .

OPENING STATEMENT OF SENATOR WIRTH

Senator WIRTH . Thank you, Mr. Chairman .

7

I want to thank you for having this hearing. I think it begins in
a positive way to set us up for the potential of a constructive con

ference with the Senate and the passage of the legislation that I
think all of us want to see happen.

On

a

>

OPENING STATEMENT OF SENATOR SASSER

Senator SASSER . Thank you , Mr. Chairman .

8

Well, I am not persuaded that new powers in and of themselves
does mean more profits for banks. In fact, it can in the long run

mean more risk, and greater losses, as we saw with the legislation
dealing with the thrift industry.

9

This committee has approved good laws: the Equal Credit Oppor
tunity Act, the Community Reinvestment Act, and the Home Mort

gage Disclosure Act, which supplement our civil rights laws. It is
time we enforced them and made any necessary improvements.

STATEMENT OF ROBERT L. CLARKE, COMPTROLLER ,

BANKS PERFORMANCE IS THE RESPONSIBILITY OF MANAGEMENT

Our approach - for both safety and soundness and compliance su

pervision - is built around the principle that a bank's performance
is — first and foremost — the responsibility of its management. We
can best supervise national banks by insisting that their manage
ments put in place effective compliance policies, that they establish
accountability, and that they develop systems and controls to moni
tor performance. We insist that national bank management take

those actions, and we insist that the policies are followed and that
the systems and controls in fact work.

/
12

approach
an
undertook
OCC
the
ago
months
Sixteen
compliance
to
ew
.supervision
objectives
complementary
two
first
,aThe
with
approach
n
supervision
.time
more
compliance
on
spend
to
was
objective
second
The
between
balance
right
the
strike
to
was
safety
and
supervision
compliance
.and
mission
,our
supervision
soundness
principal
supervision
,w
objectives
two
these
meet
To
ac
developed
ompliance
e
with
and
law
compliance
which
focuses
the
on
by
process
program
achieved
.T
be
is
regulation
encourages
adopt
to
banks
process
his
activities
compliance
in
conducted
are
their
all
that
ensure
to
systems
the
that
both
have
officers
bank
clearly
establishes
It
.
law
with
abank's
.responsibility
efforts
compliance
for
accountability
the
and
And
their
is
it
that
management
bank
senior
to
emphasizes
day
every
-working
are
systems
bank
that
ensure
to
responsibility

Remarks
by

Conference
the
:before

Initiatives
"New
Regulation
Banking
:in
"
1988
Washington
,D.C.
.
bank
the
in
are
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,fet
Occ
For
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ocusing
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and
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designed
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banks
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national
of
performance
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different
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way
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ritics
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you
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a
in
and
ew
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past
of
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the
by
efforts
your
judge
to
doing
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so

:
included
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actions
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.,t
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your
of
point
the
miss
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Ashey
ar
nd
esult
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what
misinterpret
or
fad
mere
being
do
you

10

a,Nyears
such
made
Gould
Jack
today
critic
Times
York
-tew
Thirty
ago
wo
had
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on
appeared
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before
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Presley
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performance
Presley's
of
wrote
critic
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:television
."Mr.
rhythm
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Presley
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has
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an
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renders
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w
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ea
the
or
songs
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through
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efforts
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if
ut
compliance
improve
to
is
objective
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,we
desire
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results
the
achieve
don't
noncompliance
deter
also
can

bore
."is
unutterable
an

.through
action
appropriate
corrective
:
questions
simple
two
you
ask
me
Let
,our
technique
of
terms
In
ad
is
program
compliance
revised
from
eparture
its
of
most
know
t
,you
hroughout
Athe
.s
past
in
things
did
we
way
scheduled
almost
regularly
on
exclusively
,t
history
relied
OCC
he
soundness
and
safety
promote
responsibility
our
meet
to
examinations
the
.bank
law
monitor
with
compliance
the
In
and
promote
to
AND
examinations
to
regularly
scheduled
,e
area
wcompliance
these
used
them
we
would
a
found
when
noncompliance
ofnd
,identify
areas
any

Presley
?
Elvis
have
heard
ever
you
of
many
How

?heard
Gould
Jack
of
ever
have
you
many
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theory
art
fine
student
no
I'm
Now
Presley's
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of
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probably
nd
,ewasn't
scholars
such
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following
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Pither
resley
Proust
appreciated
that
audience
an
in
,interested
P
a
nd
icasso
appreciate
would
that
audience
an
in
interested
was
He
.
Paderewski

.
management
bank
to
remedies
appropriate
recommend

rock
blues
rhythm
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roll
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Presley
nd

this
call
might
One
s
the
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to
tick
pproach

find
would
We

.
them
fix
to
bankers
force
and
faults

what
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different
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rules
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he
process
the
in
by
played
wnd
be
to
music
popular
American
,a
goal
his
was
he
one
hich

trhat
,oUnfortunately
compliance
to
approach
of
part
other
any
problems
with
dealt
directly
major
:ione
drawback
,htad
supervision

successfully
.
met
.after
fact
the
only

al
is
There
new
Presley's
of
review
Gould's
Jack
in
critic
any
for
esson
be
should
haste
in
judges
who
critic
any
that
me
to
seems
It
approach
.
least
,aat
reassess
.to
leisure
,ifthen
prepared
t
repent
not

/
14

/3

are
company
lead
holding
the
bank
activities
:and
compliance
Daily
legal
housed
bank's
the
in
Section
,w
is
hich
C
administered
aompliance
by
,.Inime
addition
full
officers
-t
staffed
four
by
is
and
division
location
or
area
each
designated
for
officers
been
have
compliance
responsible
officers
are
T
compliance
. he
company
holding
the
throughout

bankers
fix
to
force
and
faults
approach
find
still
will
revised
our
while
ats
them
Is
,i
before
compliance
promoting
in
purpose
principal
tressed
s
faults
first
the
in
systems
avoid
to
bankers
create
encourage
is
Iplace
,i
words
other
through
compliance
promoting
to
addition
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OCC's
approach
imposing
,t
found
is
noncompliance
where
remedies
he
just
other
the
like
amanagerial
function
as
compliance
elevates
b
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ank
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awe
functions
managerial
taking
by
And
s
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ystems
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our
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believe
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e
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to
approach
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us
allow
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program
compliance

correcting
and
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rtimplementing
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raining
esponding
laws
for
Compliance
c
developed
ahas
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violations
this
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it
nd
compliance
guide
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as
overall
serve
to
Manual
has
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procedural
.manual
manuals
The
Compliance
departmental
with
.company's
locations
company
The
and
departments
all
to
distributed
been
w
being
also
are
hich
compliance
,performs
reviews
Department
Audit
l
og
Compliance
maintains
.T
Officer
Review
acompany
the
by
conducted
he
company
the
has
areas
and
.A
trends
problem
identify
violations
ofnd
to
1,400
than
ore
,alendar
1987
Over
.of
training
c
compliance
am
developed
under
sessions
training
attended
various
holding
company
the
of
officers
importance
,t
he
significant
aeffort
Finally
of
nd
.its
compliance
compliance
awareness
maintain
newsletter
to
publishes
c
acompany
ompliance

,weigher
importantly
ahMost
to
lead
will
it
believe
compliance
of
level
the
industry
.in
past
,to
the
in
was
it
what
from
now
different
is
approach
our
Because

m
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istake
experience
U
,o
the
of
would
ajudge
ne
nfortunately
past
by
it
Ihave
misconceptions
that
is
program
compliance
our
concerning
observed
scarce
of
problem
our
solution
at
is
it
believe
people
some
to
emporary
is
misconception
.Another
banks
problem
of
numbers
large
and
resources
responsibility
compliance
to
hat
our
tipping
only
are
we
that
in
--

.
employees
and
officers
its
among
major
management
this
of
than
the
and
-words
louder
speak
Actions
to
committed
is
it
that
concerned
all
telling
company
banking
direction
to
necessary
leadership
and
eager
the
provide
compliance

Nick
case
the
either
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words
other
ap
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romise

supervision
ar
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ecognition
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to
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bank
traditional
that
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responsibilities
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our
fulfilling
of
means
best
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provide

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effort
compliance
its
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it
and
here
is
stay
.to

change
to
is
supervisors
as
mission
our
that
said
been
often
has
It
behavior
change
that
show
to
is
,and
changing
in
step
first
the
program
compliance
revised
the
with
experience
personal
My
.
reasonable
is
.
goal
achieve
to
beginning
already
is
it
that
indicates

11

of
level
that
evidence
to
were
banks
all
national
at
management
senior
If
,and
direction
leadership
provide
to
of
willingness
,that
commitment
national
by
compliance
of
level
overall
the
enhance
would
efforts
their
ensure
to
remedies
he
act
t
-fafter
imposing
our
than
more
far
banks
eadership
and
l
,could
commitment
Fostering
.ever
do
to
hope
compliance
he
,t
ultimate
herefore
is
management
senior
of
part
the
on
direction

After
,Ic
approach
revised
the
development
and
testing
of
months
16
an
methodology
objectives
new
about
conclusions
two
our
meets
t
:idraw

objective
our
of
.
program
objective
is
ultimate
this
that
aware
are
time
however
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e
same
the
At
revised
our
components
five
Sof
the
one
.both
ideal
and
-toerm
long
.
deter
noncompliance
continues
be
to
approach

the
supervisory
our
of
target
-Itravel
As
,b
country
around
ankers
lof
.efforts
them
to
sense
a ot
makes
program
revised
our
that
me
tell
--

wnder
e
compliance
supervision
approach
to
uour
revised
,do
know
you
As

,it
hoped
had
we
As
the
of
bankers
among
awareness
increasing
is

every
examine
not
year
.bank

.they
it
on
place
we
importance
the
and
compliance
for
have
responsibility

?with
law
the
are
complying
visit
not
do
we
banks
that
ensure
How
:
promote
to
intended
we
efforts
making
by
responding
are
bankers
And
accountability
internal
delineate
clearly
that
systems
compliance
creating

in
help
our
that
and
most
comply
to
want
banks
assume
we
First
developing
assisting
in
them
and
-are
expectations
our
what
telling
of
level
overall
higher
result
an
in
-will
techniques
compliance

compliance
.activities
law
with
b
in
aank's
operating
for
midwestern
holding
bank
management
am
of
ajor
,the
example
For
senior
compliance
comprehensive
c
-w
orporation
ide
implemented
year
acompany
last
their
violations
prompts
and
which
identifies
-system
management
our
revised
embodies
of
objectives
the
asystem
-correction
that
c
policy
statement
that
aapproach
developed
management
The
. orporate
responsibilities
,a
ond
system
compliance
bank's
the
describes
utlines
.communicates
Directors
of
senior
Board
the
and
management
support
represents
the
aChich
includes
program
bank's
The
,w
Committee
ompliance

efforts
enforcement
of
r
,. egardless
compliance
incorporates
deterrence
that
of
strategy
on
ac
lassic
rely
,we
But
also
subject
law
to
or
that
firms
are
i
, three
First
. ndividuals
elements

they
will
beeasonable
ris
chance
there
abelieve
must
regulation
.
compliance
for
monitored
Exchange
.This
operates
Commission
and
Securities
the
how
is

/15

167

examination
found
Our
bank's
the
that
taken
had
management
to
steps
no
afwritten
.create
institution
the
at
system
compliance
ormal
no
had
It

Revenue
Internal
the
how
is
.This
operates
Service

consumer
onome
decisions
credit
for
standards
,h
installment
improvement
had
The
training
.bank
applications
loan
purchase
home
or
formal
no
A.for
taking
in
interest
no
evidenced
management
compliance
nd
program
acompliance
creating
by
performance
compliance
its
improve
to
steps
any
,system
so
doing
for
need
the
understand
not
could
simply
management
The
.
alarge
found
examination
our
when
even
number
and
law
consumer
of

Highway
the
how
is
operates
Patrol
.This

.,it
works
Generally
uhere
so
Even
,t
approach
revised
our
r
a
than
more
is
nder
easonable
r
a-is
there
-easonable
expectation
national
individual
an
that
chance

for
examined
be
will
.bank
compliance

violations
:
regulation
substantive
found
examination
The
Equal
of
violations
Opportunity
Credit
regulations
inending
Truth
and
-L
aAct
evidenced
that

and
regional
all
of
half
one
in
examinations
conduct
we
year
Each
affiliates
their
and
appropriate
as
multinational
holding
companies

well
as
,as
institution
the
in
violations
of
practice
or
pattern

random
a
and
largest
the
in
not
are
that
banks
other
all
of
sample

.Tn
companies
holding
o
sample
random
,i
average
of
percent
16
his
ncludes
$1bhis
under
banks
assets
in
illion
,tF
for
sample
.all
urthermore
banks
the
from
information
of
analysis
that
so
enough
large
is
examination
all
about
conclusions
valid
statistically
provide
can
examined
are
that
ill
Iwan
that
point
national
in
banks
the
important
system
banking
--

Community
the
of
violations
various
and
Act
Reinvestment
housing
other
related
.rules

:
was
violations
those
to
response
management's
The

"We
will
get
better

forms
.

moment
a
in
to
.return

quick
was
response
Our

,for
Second
av
be
should
there
work
to
deterrence
of
strategy
our
high
ery
will
.chance
detected
be
that
noncompliance
any
that
of
measure
One
over
that
fact
is
work
at
element
,r
year
last
the
to
devoted
esources

.
direct
and

csystem
create
*Yompliance
ou
."awill

,we
short
:In
them
told

.examinations
dramatically
increased
have
compliance

12

million
$1bank
this
with
agreement
our
Under
,t1he
institution
developed
implemented
w
aand
ritten
program
compliance
days
45
.within
and
third
The
,e
final
the
that
is
strategy
compliance
our
in
lement
included
:
program
That

individual
corrective
appropriate
require
will
we
that
believe
must
bank
noncompliance
detect
we
action
.when

believe
?
that
it
should
Why
to
continue
will
we
and
-require such

Because
require
do
we
.corrective
action

agreement
,s
example
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af
signed
we
ago
$1months
an
with
1ormal
everal
million
the
out
laid
that
midwest
in
bank
this
insisted
we
steps
.
act
compliance
its
up
clean
to
take

.
there
problems
financial
no
up
turned
bank
the
of
monitoring
Our
bank
,t
condition
financial
of
terms
In
was
and
-his
is
.
categories
size
and
region
its
in
banks
rated
highest

the
among

collected
Aago
Im
information
the
analyzing
are
we
that
oment
entioned
identify
to
hope
We
of
sample
the
common
examining
are
we
banks
.from
compliance
have
to
likely
banks
of
characteristics
the
and
-problems

financial
,iBecause
condition
been
have
would
t
sterling
bank's
the
of
performed
-site
on
an
there
examination
have
would
we
that
unlikely
the
time
did
we
.at
routinely

problems
.those
analysis
that
conducting
in

statistical
of
benefit
One
that
is
analysis
identifying
in
help
may
it
components
particularly
seems
compliance
which
with
regulations
of

random
in
banks
the
of
institution
one
as
chosen
was
,the
However

it
examined
we
when
and
-year
this
compliance
for
be
to
sample
flawed
.
considerably
performance
compliance
its
found
we

difficult
.

/8

/
17

Manual
around
completed
finally
And
,w
Compliance
OCC
an
have
to
intend
e

itself
information
The
ac
our
that
sheet
data
from
comes
ompliance
1989
.
of
beginning
the

examination
.
each
during
complete
examiners
examinations
several
of
quarters
,w
conducted
have
e
During
three
last
the
have
so
collected
we
information
the
of
some
,and
banks
national
hundred
draw
cannot
we
point
this
though
,e
interesting
quite
is
far
at
ven
awhole
as
system
.statistically
it
from
the
for
conclusions
valid

wast
:l
thought
one
this
with
today
you
leave
to
like
Ib
year
ought
ould
in
W
?NIi
glasses
nterested
as
of
three
.pairs
wo.
I
as
seeing
in
.interested
supervisory
m
are
glasses
as
Just
s
end
an
to
t
,a
o
oo
re
eans
techniques
matters
well
how
is
that
standard
only
,the
them
judging
In

'own
banks
where
cases
the
of
percent
95
in
that
found
We've
systems
violations
,the
routinely
banks
Act
Secrecy
Bank
revealed
controls
of

mission
.
accomplishing
supervisor's
the
in
work
they

violation
. he
banks
T
consumer
corrected
routinely
the

law
with
compliance
bank
of
level
the
raise
to
is
mission
supervisory
Our
O
the
remedy
to
us
allowed
approach
compliance
old
. ur
regulation
and
.violations
banks
in
present
found
we
O
compliance
new
approach
ur
for
incentives
greater
end
,b
adds
it
believe
we
ut
same
the
accomplishes
from
.bankers
place
first
the
in
happening
violations
prevent
to
is
It
corrective
better
and
the
offers
approach
this
that
me
to
clear

percent
90
about
systems
own
their
by
revealed
were
they
when
violations
violations
or
laws
trust
of
time
the
percent
93
And
.
time
the
of
and
'internal
banks
the
through
of
revealed
regulation
own
systems
.were
banks
the
by
routinely
corrected
external
controls
news
the
.But
good
isn't
all
.prescription
preventative
,consumer
Act
Secrecy
Bank
found
examined
we
banks
the
of
many
In
and
technical
by
detected
not
were
that
-substantive
and
violations
trust

Than
k
you
.

.controls
bank
of
the

,inystem
words
other
In
s
where
cases
of
majority
vast
athe
found
cthe
abank
triggered
it
problem
corrected
orrect
response
asystem
wasn't
there
either
time
of
much
But
didn't
system
the
or
problem
.when
existed
find
problem
a
the

otfherefore
were
and
technical
problems
these
,m
course
Of
of
any
violations
would
.substantive
be
than
us
to
concern
less

,while
Nevertheless
clearly
show
survey
our
from
results
preliminary
the
for
,t
valid
room
is
here
approach
compliance
to
system
the
that
control
now
banks
that
performance
systems
the
of
in
improvement
.
have

from
go
we
do
?Where
here
improve
of
performance
the
banks
to
supervise
we
expect
as
Just
effectiveness
and
the
improve
are
to
working
of
,w
control
e
systems
their
.
approach
compliance
revised
our
of
efficiency
the
examination
compliance
our
in
field
-t
changes
esting
currently
are
We
.
procedures
data
results
compliance
the
from
quarter
latest
have
we
as
soon
As
analysis
statistical
our
begin
examiners
,w
prepare
will
e
that
sheets
.
year
over
collected
have
we
that
information
pool
the
of

further
.allow
approach
our
refine
inill
analysis
This
,w
turn
to
us

13

.
there
got
we
before

14

Mr. CLARKE. Mr. Chairman, I am here this morning to discuss
title IV of H.R. 5094, which is part of the banking reform legisla
tion that the House Banking Committee approved in July.
CONCERNS ABOUT ENACTMENT OF TITLE IV

The OCC has five serious concerns about title IV of that bill. Our
concerns lead us to the conclusion that it would be unwise and un

warranted to enact title IV. What are our five concerns? The legis

lation's consequences; its inflexibility; its costs; its effects on super
vision ; and its effects on Glass -Steagall Act reform . Now, let's look
at each of those concerns in turn .

ary role .
INFLEXIBILITY

The OCC's second concern with title IV is that it would prescribe
in unprecedented and unwarranted - detail how the Federal bank
regulatory agencies must enforce consumer laws.
COSTS

Our thirdconcern is that it wouldimpose a costly and inefficient
system of administering those laws. The legislation's provisions dis
miss concerns about cost and efficiency by attempting to shift the

burden of collecting compliance data to the bank supervisors. That

15

dismissal ignores reality. Whether the banks collect the data orthe
supervisors do, the banks will wind up paying for it. If the OCC
does the data collection work as title IV envisions, we will charge

the banks for the extra time we spend through increased assess
ments .

EFFECTS ON SUPERVISION

Our fourth concern is that in calling for increased disclosure,
title IV would subject examiners to undesirable pressures - a con
cern which I have discussed in detail in my written statement.

EFFECTS ON GLASS -STEAGALL REFORM

When you introduced financial reform legislation in November of

last year, Mr. Chairman , you characterized the Glass-Steagall Act's
restrictions on competition between investment banks andcommer

cial banks as " a protectionist dinosaur"
from a bygone era" and concluded that "
and the American people deserve better.”
ership , this committee, and subsequently

and " a fossil held over
[ t] he American economy
Amen. Under your lead
the Senate, approved S.

1886 , which would provide the basis for the modernization of the
Nation's financial services industry. It would permit needed compe
tition between commercial and investment banks.

16
1

cannot afford to delay Glass-Steagall reform , particularly to solve
}

unrelated - although important - problems.

1

1

1

1

-2

diversification
for
.The
opportunities
their
will
banks
all
of
survival
the
-Steagall
Glass
by
assured
be
not
,b
repeal
ut
in
competitors
successful
make
would
market
new
the
industry
aslonger
Ttronger
wait
we
he
.banking
-She
Glass
achieve
,t
repeal
to
banks
for
be
will
it
harder
teagall
.
market
services
financial
the
of
share
their
retain
to
compete

release
For
:on
8,a.m.
September
;1
988
0:00

OF
STATEMENT
ROBERT
CLARKE
L.
Before
the

5094
,H.R.
Unfortunately
full
the
achieve
to
impossible
it
make
would
Committee
-Steagall
Glass
of
benefits
,w
reform
this
hich
long
so
worked
has
structured
limit
to
T
is
legislation
proposed
. he
about
bring
hard
and

COMMITTEE
ON
H
BANKING
OUSING
,A
ND
AFFAIRS
URBAN

banks
of
number
the
could
that
new
use
actually
.It
powers
this
do
would

l
requiring
by
b
a
between
rating
CRA
its
of
approval
the
and
ank's
inkage
nonbanking
permissible
in
engage
to
applications
company's
holding
Uactivities
,a
system
proposed
the
use
to
permission
for
nder
. pplications
companies
holding
bank
by
powers
nonbank
the
ratings
CRA
average
even
with
have
necessarily
not
would
companies
holding
These
.
denied
be
would
meet
help
to
failed
.T
needs
credit
community
have
not
would
merely
hey
holding
bank
other
some
much
as
done
ar
on
.companies
scale
elative

INTRODUCTION

members
and
Chairman
Mr.
Committee
the
of
this
,Ia
here
tom
morning
of
IVart
Title
discuss
,p
5094
H.R.
legislation
reform
banking
the
that
F
,Urban
Banking
on
Committee
the
ainance
of
Affairs
nd
House

relative
powers
Linking
expanded
limits
ratings
CRA
and
.powers
banks
of
group
Ibpecific
this
elieve
asthat
to
be
would
effect
harmful
is
it
commitment
s
unnecessary
as
improved
Congress
to
I hare
:have
performance
CRA
ine
,w
years
two
last
the
important
made
.
CRA
under
responsibilities
its
of
performance
OCC's
the
in
improvements
for
need
Recognizing
the
and
improvement
resources
our
on
demands
,w
e
compliance
our
revised
have
a
in
program
examination
m
we
that
anner
the
strikes
believe
between
balance
right
safety
for
supervision
and
soundness
compliance
Aur
unlike
nd
for
5094
H.R.
approach
,o
.and
and
powers
new
in
interested
are
that
banks
by
both
compliance
encourages
conversations
We
from
know
with
our
.bankers
not
are
that
those
by
and
program
revised
attracted
have
matters
compliance
on
focus
our
the
attention
industry
the
of
will
changes
These
,r
planned
s
awe
in
esult
compliance
level
higher
of
.much
we
that
aware
are
Bankers
serious
believe
,and
compliance
about
we
motivated
has
this
their
take
to
them

Representatives
in
approved
serious
.The
July
has
OCC
this
about
concerns
,a
bill
the
of
portion
would
it
think
we
nd
unwarranted
unwise
be
and
to
.pass
provisions
its
troubling
The
most
bill
this
of
part
linkage
the
is
S
-RA
Glass
between
teagall
the
and
reform
Reinvestment
(CCommunity
).Act
,it
things
other
Among
have
to
likely
is
changing
of
effect
the
al
from
CRA
of
purpose
that
aw
credit
community
balance
to
seeks
and
needs
soundness
and
safety
that
one
concerns
allocate
to
.attempts
credit
It
prescribe
also
would
unprecedented
in
detail
regulatory
bank
how
agencies
consumer
enforce
laws
i
mposing
,would
ac
inefficient
and
ostly
system
of

17

.
laws
those
administering
financial
introduced
you
When
legislation
reform
November
in
last
of
Chairman
Mr.
year
characterized
,y
ou
Glass
the
Act's
-S
teagall
restrictions
competition
on
investment
between
commercial
and
banks
p
...
as
rotectionist
dinosaur
nd
held
ossil
b
a"[]f
from
over
ygone
concluded
and
era
that
"[t]h
e
economy
American
and
people
the
leadership
your
Under
better
." nd
deserve
Committee
his
a
subsequently
,t
a
Senate
the
pproved
,provide
s.1
886
w
would
hich
basis
for
modernization
financial
nation's
the
services
industry
.of
would
It
competition
needed
permit
commercial
between
investment
and
,a
banks
nd
likely
would
improvement
an
result
selection
a
the
in
, vailability
nd
financial
of
i
ncluding
products
those
,quality
produced
the
by
.Mtith
banks
commercial
of
icompetitors
,w
provide
would
oreover
administrative
simplicity
directness
and
a
protection
, dequate
to
insulate
most
from
deposits
bank
associated
be
may
that
risks
activities
new
.with

.
seriously
more
responsibilities
complaints
of
view
In
community
by
press
and
groups
on
reports
the
areas
inf
inadequacies
some
activity
,o
lending
local
depository
by
institutions
p
, erhaps
improvements
further
methods
our
to
compliance
of
.case
beneficial
be
would
supervision
Ho
,n
the
for
made
been
has
owever
dramatic
of
kinds
mandated
changes
legislation
proposed
the
by
which
aorce
would
things
other
mong
,f
the
replace
to
us
made
have
we
reforms
results
the
before
even
be
can
reforms
those
of
.
measured

keep
,we
end
the
In
must
banks
that
mind
in
operate
not
do

Although
Glass
S
- teagall
will
p
arepeal
be
not
anacea
for
banking
the
industry's
problems
warticularly
can
e
-a
ill
to
fford
reform
p
this
,delay
unrelated
pursue
a
important
lbeit
g
Aoals
It
estified
s
.,to
this
before
, ven
May
Committee
earnings
e
though
banks
national
of
in
stabilized
profitability
,declining
1987
been
has
phenomenon
ap
ersistent
the
during
1980s
return
The
for
assets
on
national
median
the
.
bank
percent
.79
was
c
, ompared
1987
most
the
to
of
peak
recent
in
percent
.1.11
1980
Permitting
banks
those
in
compete
to
which
from
markets
now
are
they
prohibited
would
create
new
opportunities
income
for
expand
and
banks

that
markets
protected
more
earn
to
them
allow
rate
competitive
a
than
of
If
make
cannot
banks
of
rate
adequate
an
investors
for
return
.
,return
investors
will
the
uses
other
find
capital
their
for
.O
of
providers
ther
services
financial
subject
not
are
requirements
same
the
to
and
limitations
expansion
on
opportunities
of
that
in
proposed
are
this
legislation
.
specific
my
to
turn
me
let
Now
Title
contains
IV
.six
comments
new
.and
provisions
regulatory
Savings
Two
in
Truth
-provisions
the
of
Home
examined
been
have
-requirements
Loan
Equity
and
House
the
hearings
in
My
major
the
on
focus
will
today
statement
1886
s
in
included
.are
provisions
Ihave
objections
the
.with
new
are
that
IV
Title
in

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cant :

1
-2

.The
their
diversification
for
opportunities
banks
all
of
survival
will
Sin
- teagall
Glass
by
assured
be
not
competitors
,b
repeal
successful
the
ut
would
market
new
s
athe
make
industry
.banking
Ttronger
wait
we
longer
he
repeal
-She
Glass
achieve
teagall
for
,t
be
will
it
harder
to
banks
retain
to
competo
the
of
share
their
services
.financial
market

HUnfortunately
, .R.
would
5094
make
impossible
it
achieve
to
full
the
benefits
glass
s
teagail
reform
w
,-of
hich
Committee
this
worked
has
so
long
into
the
examiner
'b
est
s
5094
H.R.
of
Implications

po
publication
for
collect
to
requirement
with
banks
national
1,300
the
excess
in
assets

examiners
.change
our
of
focus
the
materially
Contrary
,we
bill
Committee's
Banking
House
of
summary
staff
the
in
e00
banks
most
that
ven
$1believe
over
assets
with
,those
million
required
the
maintain
sophisticated
on
computer
.data
systems

Wi
.it ltis
un
CN
der
. N

that
,c
involved
be
would
what
illustrate
To
to
order
in
onsider
delineated
bank's
the
in
located
businesses
small
to
loans
identify
community
each
from
loans
of
listings
obtain
to
have
would
examiners
department
llending
A
for
each
necessary
be
would
. isting
asmall
because
the
from
issued
be
would
loan
capital
working
business
boan
department
loan
commercial
l
ad
for
f
,truck
example
or
ut
elivery
loan
installment
the
in
carried
be
,might
department
al
finance
to
nd
oan
located
be
might
plant
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disclosure
require
Fhere
,t
irst
public
be
rating
Iis
CRA
the
misinterpreted
an
as
.f
over
confusion
,confidence
health
bank's
of
indicator
be
could
bank
the
in
assessment
,S. n
accurate
econd
performance
ab
of
CRA
jeopardized
ank's

better
with
Banks
records
CRA
have
would
cooperate
incentive
more
to
with

do
and
examiners
the
groundwork
make
to
.necessary
available
data
records
CRA
worse
with
Banks
such
have
not
.would
incentive
an
result
The
work
more
be
would
examiners
higher
banks
the
for
costs
.and

A
bankers
.exchange
examiners
the
and
aclthough
on
depends
between
andid

disclosure
public
hope
would
we
,h
candor
that
diminish
not
uman
has
,o
is
it
what
being
nature
some
be
will
there
that
believe
to
ne
. he
effect
T
t
,w
litigation
of
threat
would
hird
hich
likely
negative
increase
,c
ratings
of
disclosure
public
the
threaten
also
with
ould
'edisclosure
examiners
of
.thoroughness
Fvaluations
,p
could
inally
ublic
bank's
'efforts
groups
community
of
focus
shift
the
from
performance
,
rating
numerical
needs
credit
community's
the
meet
to
helping
in

important
,there
Ironically
one
is
and
banks
the
which
in
sense
their
:iap
.supervisors
reforms
of
cost
entire
the
bear
not
All
s
ractical
have
,t
matter
will
agencies
regulatory
he
costs
the
of
some
absorb
to
reforms
agency
proposed
diverting
of
costs
the
-resources
management
reorganization
to
agencies
the
of
existing
,of
using
resources
staffing
initiate
implementing
,a
of
nd
policies
new
.the
resources
The
have
would
tasks
those
accomplish
to
necessary
our
from
diverted
be
responsibilities
soundness
and
at
worst
the
of
one
,safety
possible
times
record
time
when
banks
numbers
failed
have
number
al
and
arge
of

agency
che
and
,t
onsequently
.supervisory
to
OCC
the
cause
would
it
that
is
5094
H.R.
with
concern
major
Another

w
ould
inefficiently
.T
a
A
Subtitles
in
Bprovisions
he
nd
resources
use
in
agencies
banking
the
tell
,h
detail
fine
very
on
laws
administer
to
ow

attention
supervisory
need
banks
.problem

rin
,change
issues
aconsumer
adical
esulting
system
current
the
from
-dflearly
calendar
mandate
.and
banks
all
of
examinations
riven
,iC
we
schedule
aregular
on
banks
all
examined
exhaustively
,w
most
catch
would
e

c
overhaul
Aomplete
our
compliance
of
system
supervision
as
-proposed
the
by
mandated
considerable
at
come
would
-bill
to
sacrifice
effective
adequate
soundness
and
supervision
.safety
the
of
view
In
current
our
of
success
supervision
compliance
to
,approach
w
that
believe
e

,aBut
laws
banking
consumer
of
.violators
fact
the
after
least
t

to
abetter
is
there
have
not
do
we
-way
application
intensive
an
such
use
s
aacrifice
is
this
should
that
and
made
be
-not
.need

resources
limited
our
of
,t
Instead
relies
OCC
c
a
on
.of
he
ombination

evaluations
on
-s
off
and
activities
abite
of
procedures
ank's
.Moreover
laws
consumer
with
compliance
bank
assess
to
policies
,the
would
implications
bill's
request
to
banks
encourage
CRA
updated
an
application
,iC,inorporate
assessment
ac
of
t
.anticipation
urrently

20

not
We
do
introduce
to
need
into
banking
the
system
destabilizing
any
especially
-forces
when
concerned
is
public
about
of
safety
the
parts
services
financial
the
r
aindustry
Such
.of
estructuring
impose
would
on
at
public
the
large
associated
costs
with
banking
risky
ore
system
,am
unintended
outcome
an
would
that
inconsistent
be
clearly
the
with

with
requests
those
meet
to
us
for
impossible
be
would
limited
our
resources
.

intentions
the
of
Banking
Committee
.House
OCC's
of
heart
The
the
assessing
to
approach
compliance
level
Compliance
tshe
regulations
and
laws
all
,iwith
Program
of
selection
the
as
sample
tratified
d
national
-random
in
an
for
banks
epth
of
review

BRANCH
OF
NOTICE
CLOSURE

would
5094
require
n
aH.R.
that
ational
bank
customers
its
notify
and
p
OCC
the
roposed
s
aclosing
either
of
taffed
branch
at
ATM
an
or
days
90
least
proposed
to
prior
closing
date
.the
receives
OCC
the
If
a
complaint
valid
the
aabout
of
closing
b
,t
he
ranch
required
be
would
bank
d
aetailed
provide
to
analysis
activity
of
at
preceding
the
for
branch
p
,wrojection
athree
years
ith
level
expected
the
if
activity
of
branch
remained
would
T
open
OCC
required
be
determine
to
. he
the
if
would
sof
aclosure
result
erious
reduction
availability
the
in

their
accomplishments
and
efforts
compliance
.uncertainty
The
associated

in
selected
being
with
an
provides
sample
the
compliance
for
incentive
,
regularly
on
rely
to
having
without
examinations
,ischeduled
same
the
n
incentive
an
provides
IRS
by
audited
being
of
possibility
the
that
way
. his
laws
tax
income
the
with
compliance
described
in
Tfor
is
process
Office
our
report
the
detail
Committee
this
to
submitted
of
January
in
this
year
.

reforms
proposed
the
that
is
concern
policy
major
final
The
based
are
burden
cost
the
of
understatement
an
on
. The
compliance
CRA
banks
to
concerns
dismiss
to
try
provisions
proposed
and
cost
about
by
efficiency
of
burden
shifting
collecting
banking
the
to
data
compliance
.agencies
unrealistic
simply
is
That
,banks
another
or
way
one
In
.will
. If
examinations
compliance
increased
of
cost
the
paying
up
wind
OCC
the
will
,w
work
the
does
ultimately
e
through
time
our
for
banks
charge
,assessments
efficient
more
clearly
is
It
ab
of
indication
etter
. nd

data
,for
commitment
management's
bank
provide
to
banks
the
support
in
needs
credit
the
meet
to
helping
are
they
that
contention
their
of
community
,otheir
Realistically
data
basic
provide
can
banks
the
. nly
approach
.This
performance
their
evaluate
to
necessary
is
the
that
encourages
.OCC

services
d
I
a
such
. fhe
etermination
made
is
would
,t
OCC
look
to
have

feasibility
into
the
replacing
of
other
with
,branch
facilities
including
establishing
c
development
ommunity
.aThese
union
credit
provisions
would
apply
not
the
in
emergency
of
acquisitions
.case
Notification
On
Position
OCC's
The
Prior

believes
The
occ
that
should
banks
the
notify
of
public
close
to
plans
currently
,and
branches
we
national
encourage
the
advise
to
banks
close
plans
their
of
community
services
reduce
to
or
.branches
Through
Circular
Banking
ofssistance
a
,issuance
189
No.
trade
to
writing
groups
programs
such
on
handbooks
,a
means
other
by
nd
t
fostered
OCC
has
he
national
banks
to
'efforts
implement
and
develop
policies
notify
the

-10

-9

their
of
community
the
help
and
services
eliminate
or
reduce
to
plans

ordinarily
that
institutions
Depository
accounts
maintain
checking
would
$1,000
with
customers
service
checking
provide
to
required
be
or
.less
deposit
on
T
opened
be
could
aaccount
with
maintained
and
he
ten
$25nd
of
balance
,a
least
at
be
would
there
per
transactions
free
.month
account
the
on
interest
pay
to
have
not
would
Banks
.The
although
offer
institution
,d
require
not
could
it
of
deposit
irect
It
the
restrict
not
could
also
to
customer
payments
government
.recurring
machines
.using
teller
automatic
The
authorized
be
would
Reserve
Federal

.community
alternative
services
of
sources
secure

hor
appropriate
not
is
It
,f
governmental
other
any
or
-OCC
the
owever
body
banking
of
location
the
regarding
judgment
its
substitute
to
-owners
the
that
for
abfacilities
of
.managers
and
Bank
anks
are
offices
made
be
must
an
with
,a
businesses
private
locate
to
decisions
nd
branch
of
efficiency
the
and
towards
eye
ap
profitability
articular
.Although
bank
of
operations
overall
the
not
would
5094
H.R.
require
somewhat
its
that
concerned
,Iam
closures
branch
of
approval
OCC
position
in
us
putting
of
effect
the
have
would
language
imprecise

.
account
this
for
charges
service
establish
to
that
Depository
of
course
ordinary
the
in
checks
cash
institutions
business
Service
Cashing
Check
Government
the
offer
to
required
be
would

m
.-,p
decisions
private
rofit
gotivated
second
uessing

s,500
federal
for
,a
$1
to
up
of
checks
government
local
.When
nd
tate

provision
,t
Similarly
look
to
us
require
would
that
bill
the
of
he
would
services
sources
alternative
establishing
of
feasibility
the
into
be
the
by
taken
should
that
actions
into
occ
insert
inappropriately
.
check
.private
community
affected
,ientrepreneurs
sector
the
ncluding
some
If
amarket
profitably
serve
to
opportunities
are
there
believe
has
that
,there
others
by
abandoned
been
on
act
to
them
for
opportunities
ample
are
,mthat
Typically
new
attract
will
underserved
are
that
. arkets
belief

designate
where
branches
three
to
up
,the
registering
would
customer
allowed
tchecks
A
-d
be
would
fee
service
ollar
per
. wo
cashed
be
could
,c
services
these
of
each
For
would
ustomers
provide
to
required
be
signature
their
bearing
identification
.photo
data
basic
other
and
The
provision
Reserve
Federal
to
subject
be
would
services
these
of
safeguards
,and
regulation
certain
provides
bill
the
or
fraud
against
of
establishment
the
against
and
abuse
continuing
for
prerequisite
any
and
lowagainst
discriminate
would
that
account
the
opening
individuals
-income
moderate
account
other
without
those
.or
relationships

branches
or
charters
novo
de
from
either
services
.banking
competitors
of

acommunity
in
entities
private
of
initiatives
The
,i
its
ncluding
government
cnd
citizens
,a
groups
of
not
businesses
ommunity
the
are
-acommunity's
serving
to
solutions
of
source
best
financial
for
needs
notification
W
advance
that
believe
the
and
customers
to
.e
services

encourage
to
sufficient
is
community
affected
would
and
initiatives
such
avoid
and
banks
the
both
on
burdens
administrative
unnecessary
imposing

position
OCC
mandate
not
should
Government
that
services
be
to
have
,j
offered
ust

21

agencies
.the

should
it
as
firms
services
of
kinds
the
to
barriers
artificial
create
not
closure
Iam
branch
the
that
concerned
also
5094
H.R.
of
provisions
'b
banks
that
fact
the
ignore
apparently
am
reflect
decisions
ore
ranching
markets
.general
financial
of
restructuring
As
between
distinctions

,aIn
offer
can
of
area
the
in
date
to
it
s
.has
insurance
and
securities

services
,t
run
long
of
level
the
lower
requirements
ahese
nd
,iconsumer
importantly
More
Congressional
that
clear
not
is
.t
loses
ensure
to
needed
is
action
are
services
banking
that
.
available
widely
av
offer
now
banks
Many
low
of
ariety
-cost
,b
.T
services
banking
he
asic
.OCC
it
do
to
them
encouraged
has
this
Much
given
been
attention
. 987
communities
in
1need
A
Association
Bankers
American
the
by
study
banking
basic
offers
already
banks
two
every
of
one
that
shows
,
services
$1bIn
over
with
banks
ten
every
of
seven
.including
assets
in
illion
six
,the
addition
another
that
found
survey
to
plan
banks
all
of
percent

,banks
eroded
have
institutions
financial
specialized
formerly
other
and

forced
have
services
financial
of
providers
means
the
reconsider
to
been
.they
services
the
to
use
iTdeliver
changes
,s
part
large
from
nhose
tem
technology
new
of
use
innovative
the
services
financial
supplying
in
and
.from
firms
financial
among
competition
of
patterns
changing
New
alternatives
develop
institutions
financial
enabled
has
technology
to

the
for
branches
of
delivery
and
brick
expensive
on
-mrelying
ortar
. TMs
services
,Afinancial
example
For
their
to
access
consumers
offer
now
locations
avcannot
in
and
clock
the
around
accounts
.of
,oariety
Thus
ne
c
aommercial
that
assume
the
are
branches
bank's
suppliers
efficient
only

.
services
these
offering
start
CONCLUSION

to
services
financial
of
without
that
and
areas
local
s
, ervices
branches
.will
available
not
be

goals
,Ibelieve
Chairman
Mr.
the
by
attained
be
could
that
importance
-S
Glass
the
repeal
Act
such
of
are
teagall
attention
our
that
closing
,l
Finally
branch
on
wimitations
indirect
or
direct
hether
withdraw
to
harder
it
make
am
from
.,s
failing
of
Sarket
hort
uch
measures
-p
counter
always
are
,m
more
marginally
profitable
branches
roductive
aking

from
diverted
be
not
should
.want
task
this
We
benefits
consumer
the

I, ndeed
m
a
by
.provided
industry
services
financial
competitive
ore
amore
creating
by
-1886
S.
with
industry
services
financial
competitive
tbill
a.pro
is
-products
securities
to
respect
-cIruly
onsumer
of
however
reiterate
w
sale
the
to
respect
ith
,b
products
insurance
oth
and
House
the
are
bills
Senate
-c
anti
terribly
onsumer
i
,and
addition
n

.
ventures
risky
SERVICES
BANKING
BASIC

discriminatory
.
a"H.R.
establish
to
banks
require
would
5094
Services
Financial
asic
B
"f
Account
or
i
-lowmoderate
Tncome
would
account
his
.and
customers

transaction
ab
asic
service
: nd
services
separate
two
government
,entail
.
services
cashing
check

-11

bank
need
we
nd
,a
industry
banking
efficient
and
ealthy
h
We
the
in
inefficiencies
reduce
that
structures
and
policies
regulatory
and
safety
while
assuring
competitors
efficient
reward
market
athey
are
,b
well
as
important
needs
credit
Community
. ut
soundness
banking
m
alimit
of
attainment
our
not
must
We
. odern
matter
separate
objectives
CRA
of
meet
can
We
achievement
the
to
it
linking
by
system
.would
provide
5094
H.R.
that
structure
the
under
not
ut
,b
goals
both
new
utilize
could
that
banks
of
number
the
limit
would
5094
H.R.
create
would
.-S
repeal
teagall
Glass
of
benefits
the
educing
r
,It
powers
It
would
.make
sense
no
costs
added
such
when
banks
all
for
new

and
of
safety
protection
the
from
resources
divert
regulators
bank
make
i
,change
CRA
of
objectives
the
would
it
And
. ncreasing
soundness
,that
would
w
a ay
in
decisions
lending
private
interference
regulatory
.and
annot
,Icndermine
reasons
these
soundness
safety
bank
u
,For
fear
we
.of
5094
H.R.
IV
Title
provisions
the
many
support

23

APPENDIX
Assessment Factors &

TWELVE ASSESSMENT

1)

TACTORS

Bank activities that ascertain the
credit needs of its local community .

Examination Procedures

EXAMINATION PROCEDURES

Obtain Information from a review of bank
records and interviews with bank statt .

( Studios /customers / neighborhood groupe /
local government )
2)

3)

The extent of the bank ' , marketing
and special credit - related programs
to make community members aware of
credit services available .

The extent of participation by the

Roview bank's marketing prograa .

( RE brokers /mtg counsellng programul
advertising / convenient hours /brochureo )

Review minutes of board of directors

meetings and any other bank
documentation available .

( Bank otatt

avareness of CRA )

5)

Any practices intended to discourage
applications for credit listed in
the bank ' , au otat cuent .

Review other fair lending armination

The geographic distribution of the

Initially rely on discussion with

programs ( DCOA and Fair Housing Act ) .
( Bank staft awareness of Cw / proscreening )

bank ' . credit ont ensions , credit
applications and credit denials .

6)

Evidence of discriminatory or

other illegal credit practices .

Review prior reports of examination and

other examination programs currently being
performed .

7)

The bank's record of opening and

closing offices and providing

Obtain information from the flold or
district office or from the bank ' , records .

services at offices .

Review any public comments .

TEELVE ASSESSMENT TACTORS

9)

10 )

EXAMINATION PROCEDURES

Bank participation in local
community development and
redevelopment projects or programs .

Review written lending policy and procedure
manualo . Interview londing offloori .

The bank's origination of

Review bank financial statcounts , MIDA
disclosures , lending policy and procedure
manuals . Intervlow bank statt .

Bank participation in governmentally
Inoured , guaranteed , or subsidized
loan program for housing , small
businesses or email tam .

( HUD ' , community development block grant
program / local neighborhood preservation
efforts / CDCo / neighborhood housing servicos )

Raviow bank financial statemente , DA

disclosures , lending policy and procedure
manual..

Interview bank statt .

(mm /

11 )

The bank ' , ability to meet community

Review examination workpapers and
reports . Consider safety and soundness .
( Small banks may lack resources )

12 )

Other factors that boar upon the

Consider factors such as bank purchases
of state and municipal bondo , secondary
mortgage market securities or whether the

art ont to which I national bank

is helping to meet the credit needs
of its entire community .

bank's policies promote afforts to assist
existing residents in neighborhoods

undergoing reinvestment and change .

24

The CHAIRMAN . Well, thank you very much, Comptroller Clarke.

25

expand and provides a vehicle for public participation in the
review of the institutions' CRA performance.

26

of accomplishment in meeting their responsibilities under the CRA
on a regular basis.

This approach also has the advantage of simplicity and could

TITLE IV HAS FOUR BASIC PROVISIONS

Title IV of the House bill establishes a framework that includes
four basic parts:

27

and would result in an excessively protracted administrative proc
ess .

ADDITIONAL RECOMMENDATIONS

First, the specific data collection requirements of the bill should
not be implemented. In place of this rigid format which has the

effect of limiting lending flexibility , financial institutions should be
permitted to collect and make publicly available whatever data is

appropriate to demonstrate their record of meeting the credit needs
of the community that the institution has identified and targeted .

90-163 0 - 88 - 2

28

local communities in a manner that is nondiscriminatory and con
sistent with the principles of safe and sound banking practice.

Thank you.

1

delivery
on
release
For
,E.D.T.
a.m.
10:00

1
8, 988
September
,Iappreciate
Chairman
Mr.
appear
to
opportunity
this

various
the
address
to
Committee
Banking
Senate
before
reported
IV
,r
5094
H.R.
of
ecently
Title
provisions
consumer

.by
Committee
Banking
House
the

place
ill
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testimony
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In
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1977
Reinvestment
of
Act
Community
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on
focus
special

Statement
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implemented
CRA
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CRA
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ow
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t
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ill

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Johnson
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System
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of
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oard
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Vice
Chairman

Ido
not
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n
,iIV
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bill
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of
Title
in
included
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provisions

29

concern
of
degree
lesser
any
convey
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intend

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before

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new
regulatory
, lso
CRA
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affecting
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Affairs
Urban
and
ousing
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Banking
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asic
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eank
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qual
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equity
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Senate
S.
U.

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as

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m
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1
, 988
8
September

w
requirements
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regulatory
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handle

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serious

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concerns

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,of
testimony
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conclusion
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at
requirements
regulatory
as
astaff
in
as
.well
appendix

-2

-3
FRAMEWORK
CURRENT
THE
CRA

meaningful
efforts
assure
to
local
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communities
aware
are
available
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credit
facilities
and
steps
take
meet
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Before
discussing
suggestions
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have
been
for
made

credit
needs
n
a ondiscriminatory
in
manner
compatible
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safe

tbe
I hink
would
it
helpful
to
outline

revising
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CRA

sound
operation
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Board
The
fully
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CRA
discuss
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implement
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Board
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BOARD'S
THE
IMPLEMENTATION
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OF
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aserve
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uide
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ameaningful
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and
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gives

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rogram
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The
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establish
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record
of
institution
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their
meeting
in
credit
needs
of

the

30

responsibilities
theirthe CRA
under
anda
,

institutions
identify
take
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to
steps
credit
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meet
needs

framework
regularly
for
assessing
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the
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c
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onsistent
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eposit
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banks
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ehicle
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increasingly
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-5

number
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applications
the

examination
also
focuses
on

The

geographic

the

,and
extensions
credit
bank's
of
distribution
existence
the

.1984
1987
in
35
to
3in
only
from
increasing
comments
CRA
discriminatory
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evidence
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of

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other
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Finally
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part
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community
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and
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including

banks
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months
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rassroots

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of
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banks

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away
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loan
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performance
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noted
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Bank
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community
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examined
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offered

31

general
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identify
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of
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our

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communities
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achieved

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Board's
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banks
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state
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mphasized

-6

-7

rehabilitation
financing
.

these
to
banks
expect
and
CRA
about
serious
are
we
that

responsible
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CRA

Reserve
at
staff
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1987
During

before more than 100
spoke
Banks

these
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also
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effective
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designing
in
banks
to
useful
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c
,.the
bankers
represented

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Banks
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in
to
benefits
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t
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initiatives
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deal
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periodicals
publishing
as

communities
.

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lending
community
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programs
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on
books
resource
abank
which
in
lending
development
community
to
wish
might

Programs
Outreach
Community

forums
mutual
provide
to
,forming
participate
lenders
community

opportunities
development
community
and
education
about

implement
to
Board
the
by
taken
step
second
The

,and
techniques
help
to
designed
profiles
community
producing

Reserve
each
at
establishment
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CRA
the
of
policies
information
provide
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Officers
Affairs
Community
of
Banks

,
are
needs
what
know
community
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in
others
and
lenders
various
available
the
contribution
and
are
resources
what

,community
banks
to
techniques
and
strategies
development
about

,and
companies
holding
.bank
others

.might
make
participants

goals
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of
One

the
in
areas
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cities
of
needs
credit
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rural
owns

particularly
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that

area
this
in
activity
One
liketo

development
community
with
work

is
mention
our

.
corporations

those
to
outreach
through
districts
Reserve
Federal
areas
.
identified
,Once
needs
these
having our

32

with
familiar
become
to
is
program
affairs
community
System's

,the
CRA
of
advent
the
before
well
Since
Federal

and
of
allowed
have
Currency
Comptroller
the
Reserve

affairs
community

companies
national
and
holding
bank
by
creation
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encouraged

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identify
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banks
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banksof

.
needs
credit
community
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-hyears
one
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example
For
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ver
seminars
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conferences
and
sponsored
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community

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Community
corporations
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corporations
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chartered
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corporations
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lending

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packaging

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development
community
for
techniques
and
opportunities
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alone
Community

.
subjects
related
other
and
1987
In
Affairs
Officers
the
at

Banks
Reserve

workshops
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explored
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and
seminars

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projects
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specific
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over
)
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ommunity
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small

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revitalization
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making
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revitalization
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part
n
community
to
contributions

-9
-8

to
authority
uch
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unusual
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Reserve
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The

.
1

to
procedures
include
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maintain
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of
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1

.real
estate
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c
August
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onference
cosponsored
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ased
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-members
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ocal
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articularly
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200
about
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w
was
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dealing
1987
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pamphlet

bankers
.

.and
distributed
widely
produced
was
conference

that
Since

the
incorporating
for
methods
formalized
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gathered
needs
credit
community
regarding
findings
the
institution's
into
efforts
outreach
these
through
to
services
and
products
of
delivery
development

.
2

the
in
particularly
interest
reat
of
deal
g
awe
seen
have
time
.of
banks
national
formation
;of
community
the
segments
all
theseare
such
efforts
Outreach
Community
as
,

we

programs
lending
innovative
opportunities
study
for
,-for
ncluding
i
neighborhoods
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low-

.
3

to
CRA
the
under
charge
our
of
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believe
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home

of
needs
credit
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meet
to
institutions
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encourage
, such
projects
development
community
support
as
and
develop
Programs
,Services
Housing
Neighborhood

.
4

.
communities
their

33

low
of
needs
dentified
i
,to
specific
meet
policies

moderate
-and
i
persons
; ncome
Process
Applications
the
in
Performance
CRA
of
Consideration

specifically
designed
marketing
and
through
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public
s
,oftimulate
programs
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community
,bank's
throughout
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ilow- ncome
moderate
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and
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including

5.

CRA
implementing
approach
to
our
of
facet
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The

;
groups
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neighborhoods
banks
of
records
performance
CRA
the
consideration
involves

institution's
the
monitoring
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systems
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levels
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management
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nd
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periodically

.
6

the
under
Board
by
received
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Bank

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Merger CRA
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and

Act
Company

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availability
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community
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.
7

,with
s
financial
along
account
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taken
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performance
hen
w
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factors
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nd
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m
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programs

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practice
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It

applications
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these
reviews
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its
Through

in ce
experien

,
process
as

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found
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he
t
,of
banks
performance

institutions

critical
umber
of
n
aCRA
share
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effective
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with
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elements

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institutions

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matter

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their
improve

to
institutions
with
work
been
has
experience
Board's
The
holding
bank
banks
of
number
growing
sand
a ignificant
that

-10
11

companies
have
adopted
formal
and
detailed
internal
policies

essential
An
part
of
process
this
are
affirmative
the

programs
and
address
to
their
responsibilities
under
CRA
.the

that
steps
Board
the
takes
assure
to
institutions
fulfill

Board
the
found
has
inadequacies
in
bank
a
holding
company's
performance
program
or
the
in
context
of
an

Where

application
before
Board
,the
commitments
designed
to

commitme
made
nts

Board
the
often
requires
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periodic
reports

particular
,

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from
applicant
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progress
implementing
in
the

institut
CRAion's

raised
by
public
comments
,
wellas
as
expressed
Board
the
by
similar
in
.applications

banks
.member

those

addition
In
Board
,t
he
will
check
adherence
for

the
to
commitme
nts
--

take
and
into
account
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fulfill
to

these
commitments

While
commitments
the
vary
from
case
to
depending
particular
the
,facts

Board
The
examiners
also
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compliance
with
commitments
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during
periodic
examinations
CRA
state
of

commitme
nts
.

performance
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to
permit
Board
the
proceed
review
to
Usually
these
commitments
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addressed
many
of

.
application

on

applications
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process
In

these
institutions
made
have

improve
the

the
concerns

duringthe

next
time
institution
the
submits
an

.
application

commitments
generally
relate
to
establishing
or
improving
programs
ascertaining
for
credit
the

34

needs
of
communit
the
ying
i
; mplement
programs
communit
y
more
aware

fact
In
,w
e
observed
banks
that
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devoted
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credit
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needs
their
of

make
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the

communities
, ncome
ncluding
lowiand
neighborhoods
.-moderate
example
For
mortgage
,h
ome
lending
lowin
moderate
i
-and
ncome

institution's
the
of
credit
services

through
newspaper
radio
advertisements
b
rochures
p
osters
,and

increased
has
steadily
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during
this

areas

officer
programs
call
i
;or
mproving
internal
procedures
for

Despite
increasing
competition
by
financial
other

decade
.

reviewing
implementing
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CRA
a
;and
inally
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some

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providers
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, anks
have
maintained
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their

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of
where
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the

cases
,

position
inutstripping
field
the
small
business
olending
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service
other
financial
providers
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margin

indicated
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applicant
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-18

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-23

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-24

-25

principles
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41

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-26

-27

price
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BASIC
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‫ומיומי‬

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quickly

42

legislat
Any
ion
on
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should
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accounts
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price
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arrangement
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-29

-28

continues
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CONCLUSION

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nd
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43

increased
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-30

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-2

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-44

-43

Opportunity
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-46
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67

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•48
-

-47
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.
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69

HowTo GetA Cash Refund

Apply at First Union.
Loans are designed for low- tomoderate

incomefamilieswhoqualify.

Borrow from $ 1,500 to
$ 15,000.Useitto improve,protect,
ormake your home more energyefficient.

Get up to five years
to pay. Benefit from our favorable,
variable rates.

Make all payments

allor visit First Union and ask about ourVery

you

service that'sfast. Uncomplicated. Convenient. And
very personal.

T
FIRS .
M

1987First Union Corporation

First Union NationalBank
of Georgia

70

No Minimum
Checking.
N

BE

N
O
T

N

paU

Vow you don't have to
keep a large minimum balance
in your checking account just to
avoid high service charges. You
can open our No Minimum

minimum benefits. In fact,

• Free First Union 24 Hour

we've added plenty:
• No minimum balance

.

• Low $ 3.50 monthly main

Checking, pay only a low $ 3.50
monthly inaintenance fee and
have full use of all your money.
And at First Union , no
minimum balance doesn't mean

*11 you wnile mure than ten checks per

T
FIRS .

slutementperiod, acharge of Artycenas
peradditional check will be assessed.
Member FDIC

New Banking Power ForYou ."
First Union National Bank
of doorgia

1988 First Incon Corpuratiun

Runs 6/2 and 1616 issues Atlanta Inquirer, Augusta Focus, Acx 15 " BW

1

71

CHECKING

PERSONAL

Description

-

NO MINIMUM CHECKING

A No Minimum Checking account is :

.

Eligibility
Requirement

Account available for personal accounts only .

125
Features
.

Minimum deposit required to open account is $ 50 .
No minimum or average balance required .

No charge Accidental Death Insurance Coverage of $ 1,000 .
Deposits and withdrawals can be made through a 24 Hour

Banking Machine free of charge using a First Union Banking
Card .

Instant Cash Reserve may be affiliated with account to

.

provide overdraft protection , if customer qualifies .
May have automatic settlement of First Union Brokerage
Service transactions through this account .
Monthly detailed statement of account transactions .
May be linked to a personal savings account for a combined
statement .

10 free posted checks per statement period . ( No charge
for drafts . )
.

Check Safekeeping is required .

.

3 free check copies per statement cycle if customer needs
copies .
May not be used as collateral on loans .

.

Prospects

Monthly

Individuals with minimum check writing needs such as

This account is subject to two types of monthly charges .

Service

Charge
•

•

A 3.00 maintenance fee, regardless of account balance , and
$ .50 per check after the tenth posted check in a statement

There are no charges for First Union Banking Machine
withdrawals . However , the account will be charged for each
Relay transaction , regardless of the number of posted checks .

RSPM - 3/88

118.40 - 1

HR 509

CHECKING
MINIMUM
NO
Description
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Minimum
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$50
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72

balance
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73

N
O
N
Two Great Services
to Make First Union First With You !
Checking with No Minimum Balance
✓
✓

The Loan that's on the House

74

You CAN BANK ON FIRST UNION TO
With your First Union 24 -Hour
Banking Card, you've got a key to
the bank that you can use any day,

any time, almost anywhere. Through
out Georgia , First Union has over
100 24 Hour Banking machines as
well as over 1200 AVAIL SM locations

where you can use your 24 Hour
Banking card . There is a minimal
AVAIL S service charge of 75€ per
withdrawal and 45 ° per inquiry at
automated teller machines other than
First Union . As an added con

Now you can enjoy all the convenience
of a First Union checking account and a
First Union 24 - Hour Banking Card . . . for an
unbelievable $ 3.50 a month ! No minimum

balance required — yet you can write ten

venience, you can also use your 24
Hour Banking card at over 1800
Relay locations throughout Georgia,
North and South Carolina and
Virginia.

checks every statement period at no
charge !

No Minimum Checking ...

and 24 -Hour Banking!

A Very Special Loan
On the House

75

MAKE YOUR MONEY WORK FOR You
all the payments you've made during

a calendar year if, during that year,
you were not 30 days late on making
any payment.

Howcan you find out if you qualify
for this Very Special Home Improve
ment Loan? Just visit your nearest
First Union office and talk to the

Loan Officer. He has a listing of the
maximum allowable family income

for this loan in your county so he'll
very quickly be able to tell you
whether your income allows you to

qualify for First Union's Very Special
You've got a new source of funds,

$ 1,500... $ 15,000... or more, that you can use
for remodeling.
-

Home Improvement Loan! Don't wait
the faster you come to First
Union , the faster you could have a

more comfortable home to live in!

-

-

Let a First Union banker work with you to meet
your financial needs.

76

First Union Banking Locations Nearest You
COLUMBUS
404-571-6500

HAMILTON
404-628-4221

Main Office , 101 13th St.
Benning Park Ofc. 2406 Cusseta Rd .
Buena Vista Office, 4902 Buena

MACON
912-742-6361

Vista Rd

Main Office , 455 Walnut St.

Columbus Square Otc., 3054 Macon
Rd

Medical Center Otc ., 10th Ave. &
18th St

North Columbus Ofc . 1914 Airport
Thruway

Peachtree Office. 3471 Courtyard Way
St. Francis Office , 1969 Manchester

Hamilton Office , Hwy. 27

Eisenhower Office ,
1489 Eisenhower Parkway

First Central Office, 756 Poplar St.
Kroger Supermarket,
3670 Eisenhower Parkway
Kroger Supermarket,
4650 Forsyth Rd .

Kroger Supermarket, 660 North Ave.

Expressway

Northside Office 3998 Northside Dr.

Wynnton Office , 2450 Wynnton Ad .

ATM Kroger Supermarket,

ATM Allendale , 5840 Moon Rd
ATM Reese Road , 4410 Macon Rd

Broad St.

3076 Riverside Dr.
PINE MOUNTAIN
404-663-2221
102 Broad St.
WAVERLY HALL
404-582-2666

FORT BENNING

Jordan St.

ATM St. Mary's. 96 North Oakley Dr.
CUSSETA
404-989-3636

Cusseta Office. Anderson St. &

Waverly Hall Otc ., O'Neal Dr. &
404-682-1135

Ft. Benning Mall Otc.. 9230 Marne Rd.
Ft. Benning Office , 109 Wold Ave.
ATM Building Four , Eckel St.
ATM Sand Hill, 3218 1st Airborne
Div . Rd

T
FIRNSIO. N
U
First Union National Bank
of Georgia
Member FDIC

Equal Housing Lender

Equal Opportunity Lender

BULK RATE
U.S. POSTAGE

77

FIRST UNION NATIONAL BANK

needs of our various communities. This will include, from
time to time, formal and informal research , sponsorship
of surveys and studies, meetings and /or discussions with

neighborhood associations, community based groups,
development corporations, local and regional govern
The Board of Directors of First Union National Bank of

North Carolina recognizes the Bank's continuing and af
firmative obligation to help meet the credit needs of its
community, including low and moderate income neigh
borhoods, consistent with the safe and sound operation
of the Bank as set forth in the Community Reinvestment

ment agency officials, religious associations, real estate
brokers, and other community related groups that repre
sent the needs of low and moderate income individuals

Act of 1977 and the implementing regulations. In order to
implement this policy, the Board of Directors has adopted
the following statement:
ANNUAL REVIEW OF
COMMUNITY REINVESTMENT

LOCAL COMMUNITY
The local community served by this office is delineated
as the entire county in which this office is located .
CREDITS

The Bank offers the following types of credit services to

qualified applicants in this community:

COMMUNITY REINVESTMENT

You Should Know That:

DETERMINING COMMUNITY

78

community credit needs to :

WE WOULD LIKE TO HEAR FROM YOU

First Union always welcomes your opinions on how
we're meeting the needs of this community, and sugges
tions for new ways to serve you. After writing your com
ments below , please sign your name, detach this card ,

and mail it to us. Abank representative will respond
And to the

directly to you about your ideas.
COMMENTS

Your letter together with any responses by us, may be
made public.

HOME MORTGAGE

NAME
ADDRESS
CITY

STATE
PHONE

ZIP

79

A Very
Special Loan
ON THE HOUSE

01

T
FIRNSION

:

U

First Union National Bank

of South Carolina

First Union offers Home

Improvement Loans for low
to moderate income
families **

Secured and unsecured loans, if you

cmber FDIC

Equal Housing Lender
Equal Opportunity Lencer

RO

LENDER

qualify, Borrow from $ 1,500 to $ 15,000.
Use the money to improve your home.
Pay from 1.25% to 2.5% over the
current Prime Rate : Get a 1.5% refund
for keeping up payments. Take from five

years to 12 years to repay.

" Do you qualify ? See the back page!

80

A Very
Special Loan

Interest rates ? More good news. On
loans under $ 6,500 you pay just 2.5%
over Prime Rate

And on loans of

$ 6,501 and up, you pay just 1.25 % over
Prime Rate ( The Prime Rate* may
vary from time to time.)

ON THE HOUSE
If you live in your own single family
home and have a low to moderate
family income, ( no more than 80 % of
the median in your county - see the
back page) First Union has a Very
Special Home Improvement Loan
from $ 1,500 to $ 15,000, subject to basic
qualification guidelines — a loan that
you can use for alterations, repairs, or
improvements to your home! ( Note:
Loans may not exceed 85 % of the value
of the property after improvements and

-

less any mortgages .)
-

* First Union National Bank of South

81

A Very
You qualify if:

Special Loan
ON THE HOUSE

You can borrow on your

signature:

COUNTY

MAXIMUM FAMILY INCOME TO QUALIFY
( 80 % OF COUNTY MEDIAN )

Abbeville
Alken

$ 20,276.3
15,068.5

Anderson

21,820.2

Bamberg

16,403.3
21,613.7
26,040.1
19,187.4

Beaufort

Berkeley
Calhoun
Charleston
Cherokee
Chester

Chesterfield
Clarendon
Colleton
Darlington

You can take a mortgage:

Dillon
Dorchester

Edgefield
Fairfield
Florence

Georgetown
-

Greenville

Greenwood
Hampton
Horry
Jasper
Kershaw
Lancaster
Laurens
Loe

Lexington

REWARD !

McCormick
Marion
Marlboro

Newberry

You get back 1.5% of what you've
paid in any year that you've kept up the
payments — that is, haven't become 30

days delinquent.

23,041.6

Allendale

Oconee

Orangeburg
Pickens

Richland
Saluda

Spartanburg
Sumter

Union

Williamsburg
Yo: k

22,139.6
21,741.0

20,804.3
18,348.4
16,397.2

16,951.2
19,425.5

16,324,4
22,489.4
18,242,1
19,483,8
19,743.3

23,174.0
23,915.2
22,294.9
16,928.0
19,651.0

18,355.0
21,710.2
22,270.1
21,580.6
17,650.4
28,884.0
17,978.5

16,954.0
17,297,6
17,297.6

20,886.1
17,092.5
24,214.3
23,258.2
17,935.5
22,119.6

17,660.1
20,437.6
16,938.7
23,184.8

82

4522D
DRAFT

Tentative Effective Date 11/1/87
FIRST UNION CORPORATION

GEORGIA CRA UNDERTAKING

First Union hereby affirms its dedication and commitment to
the communities in which it does business and to the Community
Reinvestment Act . First Union has a long and proud tradition of
active leadership in the communities and states in which its
offices are located . As First Union expands into Georgia , it
believes it is important to carry forward its tradition of
meeting the credit needs of its entire community , including low
and moderate income neighborhoods , consistent with the safe and

sound banking operations ,

and to that end makes the following

statement :
1.

Determining Community Needs

First Union , through its Georgia subsidiary bank , from
time to time will conduct community needs
studies in metropolitan areas

2.

assessment

Outreach and Marketing

First Union , through its subsidiary bank , will use its
best efforts to inform low and moderate

income groups

and minority businesses

of

and

communities

its

basic

lending programs and other services .
For
instance , the commercial call program of the Georgia
subsidiary bank will include minority businesses and
community development agencies and corporations . First
banking ,

Union will endeavor to employ minority advertising
marketing firms to assist it in these efforts .
3.

or

Innovative Lending Programs
( a)

First

Union

further

acknowledges

the

need

for

innovative lending programs for low and moderate
income individuals and groups and minority busi
ness enterprises , including home mortgage lending
and
neighborhood and residential rehabilitation
lending .
First Union has
long supported such
programs in North Carolina and pledges to provide
such support
itself
and through its subsidiary
bank in Georgia .
This type of community support

83

is indicative of First Union's commitment to its
communities and with which it has a long history
in the State of North Carolina .

First Union will

seek opportunities in its market area in Georgia
to provide similar community support .
( b)

First Union agrees to make every reasonable effort

to conduct a loan program which is responsive to
the growing credit needs of the low and moderate
income

areas

its

of

subsidiary

bank's

market

This program is intended to provide loans
for
low
and
moderate real
incomeestate
housingprojects
, small . busi
and commercial
ness
areas .

use

as

( i)

( ii )

1 to 4 family structures
home improvement loans ,

Housing Development
rehabilitation

home mortgages ,

loans

loans

and

construction and

permanent

mortgage

financing to be made available to non- profit
and other developers for new construction and

rehabilitation of housing for low and moder
ate income and minority residents in qualify
ing areas .

( iii )

( c)

Small

Business

loans

for

businesses

with

First Union recognizes the importance of community
development corporations or other similar organi
zations
and will provide both financial support

2

84

and technical assistance to such corporations or
organizations .
Such support may be in conjunction
other banks or companies , or in cooperation
with non - profit organizations or state and local
with

agencies .

Financial support may be in the form of

investment or contributions .

( d)

Supplementing the effort will be a minority enter
prises lending policy providing that any lending
officer may approve a minority enterprise loan
his or her lending limit with the further
proviso that in order for a minority enterprise
loan request to be turned down the concurrence of
at least two lending officers will be required .
In addition , each regional office in Georgia will
designate or have access to at least one lending

within

officer

( e)

to

The bank's credit training programs will include
pertaining to its policy regarding
low and moderate income groups and to
minority businesses SO that appropriate personnel
will be aware of
the bank's objectives in this
information
loans

to

Through education and information programs
loan officers and other bank officers will be kept
advised of their responsibilities under the Com
munity Reinvestment Act and fair lending practices
area .

laws .

( f)

Each regional office will have access to a lending
resource
person whose principal responsibility is
to assist and inform bank lending officers , and to
assist customers and potential customers with such
programs as :

( i)

Small

Business Administration

loan programs

and certified development company programs ;

( ii )

Neighborhood Housing Services Programs ;

( iii )

Urban Development Action Grants ;

( iv )

Community Development Block Grant Programs
for housing and economic development ;

( v)

state
Specialized
programs ; and

( vi )

Other

available

and

minority ,

county

low and moderate

income , and government loan programs .
3

mortgage

85

4 .

Local Boards
In

an effort to further improve communications between

First

Union's

subsidiary

bank

and

low

and

moderate

income groups and minorities , the subsidiary bank will
seek individuals to elect to its local boards from low

and moderate income groups , minority groups or other
community involved groups which are representative of
low and moderate income groups and minority groups . It
shall be the goal of the subsidiary bank in Georgia to
place one such individual on each of its local boards
as soon as is reasonably practical .
5 .

Annual Reviews of CRA Compliance
It shall be the policy of the Georgia subsidiary bank
to have annual reviews of its Community
Act Statement , policies and procedures .
review shall be

6.

Reinvestment
Such annual

Charitable Contributions
First Union will continue the same commitment towards
charitable giving that

7.

Basic Banking Services

First

Union

supports the concept of providing basic

banking services on a reduced cost basis , directed
towards low and moderate income groups and will intro
duce such basic banking services in its markets in

Georgia as soon as reasonably practical .
8.

Counseling
First

Union

believes

that

financial

institutions

can

properly and usefully play an important role in assist
ing

low

and

moderate

income

borrowers

and

customers

86

through the support of credit counseling and similar
First
consumer services offered by third parties .
Union will seek ways to support community based non
counseling
financially
profit
services

9 .

Communication Process

First

Union
and

acknowledges

dialogue

meetings ,
group

increased

conferences ,
an

usefulness

of

open

produced

seminars
and other forms
First Union is
interested

communication .

maintaining

the

understanding

by
of
in

open
a

5

87

Commercial Loans

Section

Minority Business Loans
Subject
Policy
Summary :

First Union National Bank is committed to assisting minority
businesses be viable , profitable and valuable members of our
various communities .

This commitment is best demonstrated

by aggressive and innovative support of the credit and
management assistance needs of minority businesses .
1.

Background
Since 1973, First Union has had in place a written Minority
Loan Policy . As the result of continuing changes in the
Bank and the communities we serve , it is appropriate that
this policy be revised and expanded to comply with the
Bank's commitment to serve the convenience and needs

of the entire community without regard for race , creed ,
sex , national origin or economic status of the customer .

Minority Business Defined
The term " Minority Business" refers to those businesses

owned by Native Americans , Blacks , Orientals , Hispanics
and low and moderate income individuals .

Ill . Loan Approvals

IV .

Loan Declines

V.

Communication With the Applicant

In those cases when a loan is declined , it is the responsibility
of the lending officer to fully explain to the applicant the
reasons for the decline . If possible , the applicant should also
be shown those factors , which , if improved , would enhance
the application .
VI .

Greater Than Usual Risk

Historic experience has shown that regardless of ownership ,
loans to small and new businesses have a higher - than -average
degree of risk . Within credit policy and prudent lending
practices , the loan officer is encouraged to take an innovative
approach to these credits in order to develop a loan structure
where the risk is acceptable . This should include a plan for
proper account servicing .

88

VII .

Assistance to Minority Business

VIII . Each city office will designate or have access to at least one

89

3090D
PIRST UNION CORPORATION

NORTH CAROLINA CRA UNDERTAKING

In response to expressed concerns of certain individuals and
community groups , First Union renews its dedication and commit
ment

to

the

communities

in which

it

does

business

and

to

the

Community Relovestment Act .

First Union has a long and proud
tradition of active leadership in the communities and states in

which

its

offices

are

As

located .

First

Union

expands ,

it

belleves 1t 16 laportaat to carry forward this tradition in
North Carolina of Reeting the credit needs of its entire con

Buaity. lacluding low and noderate income neighborhoods . Con
sistent with the safe and

sound banking operations , and to that

end makes the followlag statement :
1.

Determining connunity Needs
first

Union ,

through

its

North

Carolina

subsidiary

bank , from time to tine will conduct community needs
assessneat
studies
10 metropolitan areas of North
Carolina where it conducts its
banking operations ,
seeking to determine banking product and credit reeds
of low and moderate income groups and niporities within
these areas .
The bank's studies will laclude those
portions of municipalities and counties in the bank's
market areas which have median household incones equal
to or less than 80% of the median household lacone for

the SMSA or county in which the household is located .
These studies will be conducted by First Union or by

third party consultants under contract to First Union .
The order of priority for these studies will be deter
ained by First Union and the studies will include input

from community based organizations , community develop
nent organization
s and other interested

parties .

The studies will

or concerned
commence within the second

and third calendar quarters of 1986 and will be con

pleted within a reasonable period of time thereafter .
2.

Outreach and Marketing

First Union , through its subsidiary bank , will use its
best efforts to inform low and moderate income groups
and the minority connunities of its basic banking ,
leading programs and other services . This effort will
laclude innovative advertising , and marketing efforts
of programs directed toward low and moderate income

groups

and

minority

connunities .

Por

instance ,

the

90

connercial call program of the North Carolina subsid

lary bank will include minority businesses and com
First
munity development agencies and corporations .
Union will use its best efforts to employ minority
advertising of marketing firms to assist in implement

ing these advertising and marketing efforts with the
goal that no less than 10%

of the contracts to outside

suppliers used by the subsidiary bank in these efforts

be awarded to minority advertising or marketing firms .

.

3.

Innovative Lending Programs

( a)

First

Union

further

acknowledges

ex
concerns
for innovative
and
for
income
noderate
low
and
groups
minority business

pressed with respect to
leading

programs

the

need

individuals

and

enterprises ,

including home mortgage lending and

and
neighborhood
residential
lending .
First Union has long

rehabilitation
supported such

programs in North Carolina and pledges to continue

such support with

leadership . volunteer

commit

and funding in partnership with community
development Corporations , state and local develop
ment agencies and other representative groups and
agencies .
This type of community support is indi
ment ,

cative of First Union's connitnent to its communi
ties and with which it has a long history in the
State of North Carolina .
First Union will seek

new opportunities in North Carolina to continue to
provide sinilar community support .
( b)

First Union agrees to make every reasonable effort
to conduct a loan program which is responsive to
the growing credit needs of the low and moderate
income areas of its subsidiary bank's market
areas .
This program is intended to provide loans
which are targeted for low and moderate income
housing . small business and commercial real estate
projects . The program will include those portions
of municipalities or counties of North Carolina
which have median household incomes equal to or
less than 80% of the median household income for

the county of SMSA in which such municipality is
located .

The

bank

will

use

1ts

general

under

writing criteria , terms and conditions 10 this
program and will use its best efforts to be as

innovative and flexible as possible

in applying

prudent
banking
lending practices and safe
operations , the bank will make reasonable efforts
to qualify loan requests presented to the bank
pursuant to this program . with respect to small
such

standards .

Within

2

the

bounds
of
and
sound

91

business

loans

which

are

( 1)

.

( 111 )

Small

Business

loans

for

businesses

with

under $ 5 million in annual sales in qualify
areas .
Loan categories
will include
building construction , building improvement ,
machinery / equipment, and working capital .

ing

The bank will endeavor to make favorable pricing
available on loans under this program .

As a part

of this program , the bank may seek other banks to
participate with it and may seek government and
other

alternative

resources .

This

program

may

provide grants , loan guarantees or interest write
downs .

)
(c

First Union recognizes the importance of community
development Corporations and intermediary develop

nent organizations and will provide both financial
support and technical assistance to such corpora
or organizations .
Such support may be in

tions

conjunction with other banks of companies , or in
cooperation with non - profit organizations or state
and local agencies . Financial support may be in
the form of investment or contributions .

( d)

Supplementing the effort will be a ninority enter

3

90-163 О

- 88 - 4

92

at least two leading officers will be required .
In addition , each city office 10 North Carolina
will designate or have access to at least one

lending officer to be responsible for monitoring
the availability of minority loan programs to
assist the bank or minority businesses .

( e)

The bank's credit training programs will include

( f)

Managenent

assistance ,

such

is

( g)

Each

( 1)

city office will

to

have

access

Small Business Administration loan programs
and certified development company programs ;

( 11 )

Neighborhood Housing Services Programs ;

( 111 ) Urban Development Action Grants ;
( iv)

Community Developaent Block Grant Programs
for housing and econonic development ;

( v)

Specialized
programs ;

( vi )

state

and

county

mortgage

and

Other available minority . low and noderate
lacone , and government loan programs .

93

Local Advisory Boards
In an effort to further improve communications between

First Union's subsidiary bank and low and moderate
income groups and minorities , the subsidiary bank will
seek individuals to elect to its city advisory boards
from low and moderate income groups , minority groups or
other community involved groups , which are representa

tive of low and moderate income groups and minority
These efforts will begin within two months and

groups .

a minimum of one such individual will be elected to the
advisory boards 10 Charlotte , Raleigh , Wilmington ,

Winston- Salen , Greensboro , and Asheville with a goal of
accomplishing this by December 31 , 1987 .
It shall also
be the goal of the subsidiary bank in North Carolina to
place one such individual on each of its other city
advisory boards as 80on as
5.

Annual Reviews of CRA Compliance

It shall be the policy of the North Carolina subsidiary
bank to have annual reviews of its Community Reinvest
Statement , policies and
Act

nent

be

6.

Charitable contributions
First Union will continue the same commitment towards
charitable giving that it has employed in North
Carolina for many years . First Union evaluates indi

vidual applications for contributions and makes deci
sions
regarding then after considering need and
potential for positive impact , financial responsibility
and similar related factors .
An important part of
First Union's commitnent to community services is its

desire to assist the needy and handicapped and to pay
particular attention to the needs of community oriented
and community based organizations .
7.

Basic Banking Services

First Union supports
baoking

services

On

the concept of
a

reduced

cost

providing basic
basis ,

directed

towards low income groups and senior citizens and will
continue

its

efforts

to

services to narket..

5

bring

such

basic

banking

94

8.

Evaluation of Underwriting Criteria
First Union will engage in an . evaluation of its credit
and underwriting criteria and the credit needs of the
CORRunities

in

its

market

First

areas .

Union's

evaluation of the criteria will be based upon its own
past experience in establishing and implementing such
criteria , safe and sound banking practices, and will
reflect laput from the connunities served by the bank
through the connunity needs assessments perforned by
first Union .
9.

Counseling

First

Union

believes

that

financial

institutions

can

properly and usefully play an important role in assist
ing

low and

moderate

lacone

borrowers

and

customers

through the support of credit counseling and similar
services offered by third parties ..
First
Union will seek ways to support community based non
counseling
profit
services
financially
consumer

10 .

CORRunication Process
First

acknowledges
Union
and
increased .

dialogue

11.

the

usefulness

understanding

of

open

by

Monitoring

First Union will hold quarterly meetings for one year
with counsel for the concerned groups and individuals

to monitor læplementation of this undertaking.

If the

needs assessments provided for in Paragraph 1 of this
undertaking are not substantially completed at the
expiration of a one year period , then the monitoring

period will be extended for one additional quarterly
neeting .

Such representatives will a8818t First Union

10 presenting its compliance efforts to other concerned

groups or parties should further questions be expressed
with respect to First Union's CRĀ
Carolina .

6

compliance in North

95

INTEROFFICE MEMORANDUM

To

Distribution

John R. Georgius

Office

Office

Subject

From

Community Reinvestment Act ( CRA )

Date

Jeg

December 18 , 1986

All of you are aware of the Community Reinvestment Act ( CRA ) and First
Union's recent " Undertaking" that reaffirms the Bank's commitment to the
principles and requirements of CRA .
The success of First Union's efforts to support the principles and requirements
of CRA and the Undertaking is dependent on your commitment to implementation .
Successful implementation means that you must be responsive to inquiries con
cerning CRA and maintain a positive attitude toward these responsibilities .
Recently the Office of the Comptroller of the Currency conducted an examination
that focused on our CRA compliance . We were judged in compliance , confirming
our prior history and commitment to serving all segments of our communities .
CRA will continue to get special emphasis from examiners as well as consumer

activist groups . Less than full compliance could hinder efforts to expand
our interstate banking network . This makes our commitment to comply
with the Act and the Undertaking all the more important. Also , it is

increasingly important that we be able to document our CRA related activities

whether they be loans, volunteer work in our communities or contributions.
To assist us in compliance with the Undertaking and CRA , First Union
is unique among North Carolina banks in developing innovative banking
products . No Minimum Checking and our low /moderate income home improve
ment loan program were developed to insure that we have products available
for all economic segments of our communities.
The Undertaking speaks directly to the need for innovative lending programs
for low and moderate income individuals and minority business enterprises .
First Union has had a minority business loan policy since 1973. To comply
with the Undertaking , this policy has been updated with expanded
responsibilities for our loan officers and managers. A copy is enclosed .

Compliance with our minority business loan policy and the spirit of the Under
taking means that you should :

Be certain that your lending personnel know their responsibilities.
Assist your area of responsibility in ensuring that calling officer
programs include efforts to develop minority business loans.
.

Encourage development of management assistance teams that would be
available to assist minority businesses and community based organizations
in such areas as loan packaging , market analysis and financially related
areas .

FUNB 1500

96

Distribution
Page Two

December 18, 1986

When opportunities arise , encourage bank officers to be available
to minority business groups , community based organizations and
similar groups to discuss the criteria and requirements for obtaining
bank credit .

CRA is consistent with our Purpose Statement of Community Service and
our continuing commitment to provide Quality Customer Service. Attitude
is just as important as any element of our policy.

Distribution :

Group Executives
Regional Executives
City Executives
Commercial Banking Managers
Consumer Banking Managers

Group Consumer Banking Directors
Group Credit Administrators
CC :

T. V. Adams
Marion Cowell
Barbara Massa

Bill McDuffie
John Morrison

Mal Murray
Bill Randle
Tom Ridenhour
Tom Rideout
Al Sale

Lenny Springs
Ann Thomas

Steve Woody

97

Commercial Loans

Section

Minority Business Loans
Subject
Policy

Summary :

First Union National Bank is committed to assisting minority

businesses be viable, profitable and valuable members of our
various communities .

This commitment is best demonstrated

by aggressive and innovative support of the credit and
management assistance needs of minority businesses .
1.

Background

Since 1973, First Union has had in place a written Minority
Loan Policy . As the result of continuing changes in the
Bank and the communities we serve , it is appropriate that
this policy be revised and expanded to comply with the
Bank's commitment to serve the convenience and needs
of the entire community without regard for race , creed ,

sex , national origin or economic status of the customer .
Il .

Minority Business Defined

The term " Minority Business" refers to those businesses
owned by Native Americans , Blacks , Orientals , Hispanics
and low and moderate income individuals .
111 .

Loan Approvals
All minority business loan requests should receive the fullest
consideration . A loan officer may approve a minority business
loan application within the officer's designated lending limit .

Requests in excess of the officer's lending limit would need
to be approved in accordance with regular approval policies.
IV .

Loan Declines

If it is the decision of the loan officer to decline a minority
business request , then the officer must consult with and
obtain written concurrence with the decision to decline

from a lending officer of higher authority .
V.

Communication With the Applicant

In those cases when a loan is declined , it is the responsibility
of the lending officer to fully explain to the applicant the
reasons for the decline . If possible, the applicant should also
be shown those factors, which , if improved , would enhance
the application .
VI .

Greater Than Usual Risk

Historic experience has shown that regardless of ownership ,
loans to small and new businesses have a higher - than -average

degree of risk . Within credit policy and prudent lending
practices , the loan officer is encouraged to take an innovative
approach to these credits in order to develop a loan structure

where the risk is acceptable . This should include a plan for
proper account servicing .

98

VII .

Assistance to Minority Business

VIII . Each city office will designate or have access to at least one

99

30640

FIRST UNION CORPORATION

SOUTH CAROLINA CRA UNDERTAKING

In response to expressed concerns of certain community
groups , First Union renews its dedication and commitment to the
communities in which it does business and to the Community

Reinvestment Act . First Union has a long and proud tradition of
active leadership in the communities and states in which its

offices are located .

As First Union expands into South

Carolina , it believes it is important to carry forward this

tradition and to that end makes the following statement :
1 .

First Union , through its subsidiary bank , will conduct
community needs assessment studies in certain
metropolitan areas of South Carolina where it conducts
its banking operations ou into which it expands in
South Carolina , seeking to determine banking product
and credit neccs oi low and overate income groups and
These studies will be

minorities within these areas .

-conducted by First Union or by third party consultants
under contract to 1:31 inion .

The order of priority

for these studies will be determined by Firsi Union ang

the studies will include input izom community based
organizations , community developmeni organizations and
other interested or concerne parties . The studies
will commence within our enths of the effectile cate
oi dirsi Unior's acquisition of Souther? Bancorporation
( the " Effeciive Date " ) and will be completed within û
reasonable period of time thereafter .
2 .

First Union , through its subsidiary baak , will use its
best efforts to inform low and moderate income groups
and the minority communities of its basic banking ,
lending programs and other services . This effort wili
include innovative advertising and marketing efforts
directed toward 10: and moderate income groups and
minority communities . For instance , the commercial

call program of the South Carolina subsidiary bank will
include minority businesses and community development
agencies and corporations .

First Union will use its

best efforts to employ minority advertising or
marketing firms to assist in implementing these
advertising and marketing efforts with the goal that no
less than 10 %

of the contracts to outside suppliers

used by the subsidiary bank in these efforts be awarded

100

to minority advertising or marketing firms .
( a)

First Union further acknowledges concerns

( b)

First Union agrees to make every reasonable effort
to conduct a loan program which is responsive to
the growing credit needs of the low and moderate
income areas of its South Carolina subsidiary
bank's market areas .

This program is intendes to

provide loans which are targeted for low and

moderate income nousing , small business and
commercial real estate projects . The program will
include , but not be limited to , those portions of

municipalities of South Carolina which have median
household incomes equal to or less than 80 % of the
median household income for the SMSA in which such

municipality is located . The bank will use its
general underwriting criteria , terms and
conditions in this program and will use its best

efforts to be as flexible as possible in applying
such standards .

within the bounds of prudent

lending practices and safe and sound banking
operations , the bank will make reasonable efforts
to qualify loan requests presented to the Bank
pursuant to this program . Elements of a
successful program will include :
( i)

1 to 4 family structures
home improvement loans ,

( ii )

Housing Development loans

N

3 .

-

home mortgages ,

construction

101

and rehabilitation loans and permanent
mortgage financing to be made available to
non - profit and other developers for new
construction and rehabilitation of housing
for low and moderate income and minority
residents in qualifying areas . Every

effort will be made to approve loan
requests under this program only for

developments that do not displace residents
without offering suitable replacement
housing .
( iii )

Small Business loans

for businesses with

under $ 5 million in annual sales in
qualifying areas . Loan categories will

include building construction , building
improvement , machinery / equipment , and
working capital .

The bank will endeavor to make favorable pricing
available on loans under this program .

The bank

may seek other banks to participate in the program
and seek government and alternative resources such
as grants , loan guarantees or interest write downs
in this program .
( c)

First Union recognizes the importance of community
development corporations and such othe :
intermediarý development organizations , such as
the Charlotte , North Carolina , Neighborhood

Housing Services , to the economic development of
South Carolina and will provide both financial
support and technical assistance to such
corporations . Such support may be in conjunction

with other banks or companies , or in cooperation
with non - profit organizations or state and local
agencies . Financial support may be in the form of
investment or contributions by First Union of its
bank subsidiary in South Carolina .

Supplementing the effort will be a minority
enterprises lending policy providing that any
lending officer
loan within his
further proviso
enterprise loan

may approve a minority enterprise
or her lending limit with the
that in order for a minority
request to be turned down the

concurrence of at least two lending officers will
be required . In addition , each city office in
South Carolina will designate or have access to at
least one lending officer to be responsible for
monitoring the availability of minority loan

3

‫الي‬

( d)

102

programs to assist the bank or minority
Further , the banks credit training
programs will include information pertaining to
its policy regarding loans to minority businesses
so that appropriate personnel will be aware of the
bank's objectives in this area . Through
affirmative education and information programs
loan officers and other bank officers will be kept
advised of their responsibilities under the
Community Reinvestment Act and fair lending
businesses .

practices laws .
( e)

Management assistance , such as legal advice ,
account services and technical expertise from
private industry is essential to continued
viability of borrowers .

Bank officers will be

encouraged to develop management assistance teams

in their communities to assist minority business
enterprises .

In addition , technical assistance

will be provided by bank personnel to community
development corporations in areas such as loan
packaging , market analysis and financially related
areas .

( 1)

Each city office will have access to a lending
resource person whose principal responsibility is
to assist bank lending officers , customers and
potential customers with such programs as :
( i)

Small business Administration loan programs
and certified development company procräms ;

( ii )

Neighborhood housing Services Programs ;

( iii )

Urban Development Action Grants ;

( iv )

Community Development Block Grant Programs
for housing and economic development ;

( v)

Specialized state and county mortgage
programs ;

( vi )

and

Other minority or government loan programs
available to the bank's customers .

4 .

In an effort to further improve communications between
First Union's subsidiary bank in South Carolina and low
and moderate income groups and minorities , the
subsidiary bank will seek individuals to elect to its

city advisory boards from low and moderate income

groups , minority groups or other community involved

4

103

groups , which are representative of low and moderate
income groups and minority groups . These efforts will
begin within two months of the Effective Date and a
minimum of two such individuals will be elected to the

advisory boards in Greenville , Columbia , Orangeburg .

and Charleston with a goal of accomplishing this within
18 months of the Effective Date . It shall also be the
goal of the subsidiary bank in South Carolina to place
one such individual on each of its other city advisory
boards .

.

5 .

It shall be the policy of the South Carolina subsidiary
bank to have annual reviews of its Community

Reinvestment Act Statement , policies and procedures .
Such annual review shall be an agenda item on each city
advisory board's agenda at least three months before
such statement , policies and procedures are to be

reviewed for annual implementation by the subsidiary
bank's general board of directors and management .
6.

First Union will continue the same commitment towards
charitable giving that it has employed in North
Carolina .

First Union evaluates individual

applications for contributions and makes decisions
regarding them after considering need and potential for
positive impact , financial responsibility and similar
related factors .
an important part of first Union's
commitment to community services is its desire to
assist the needy . and handicapped and to pay particula :
attention to the needs of community oriented and
community based organizations .
7 .

First Union supports the concept of providing basic
banking services on a reduced cost basis , directed
towards low income groups and senior citizens and will
continue its efforts to bring such basic banking
services to market .

8 .

As First Union expands into South Carolina by
acquisition , First Union will engage in an evaluaiion

of the credit and underwriting criteria of the acquired
bank and the credit needs of the community in which the
First Union's evaluation of the

bank is located .

criteria will be based upon its own past experience in
establishing and implementing such criteria , safe and
sound banking practices , and will reflect the input and

experience of the acquired bank , as well as input from
the communities served by the bank through the
community needs assessments performed by First Union .
9.

First Union believes that financial institutions can

5

104

properly and usefully play an important role in
assisting low and moderate income borrowers and

customers through the support of credit counseling and
similar consumer services offered by third parties .
First Union will seek ways to support community based

non - profit counseling services financially and with
volunteers .
10 .

First Union acknowledges the usefulness of open
dialogue and increased understanding produced by
meetings , conferences , seminars and other forms of
group communication .

First Union is interested in

maintaining an open and continuing dialogue with
community groups and others following its expansion
into South Carolina .

To facilitate the communication

process , the bank will provide a publicly disclosed
system by which individuals , community oriented groups
low and moderate income groups and minorities can
communicate their concerns directly to a bank officer

with the responsibility for making these concerns known
at appropriate levels of management within the bank .
11 .

First Union or its South Carolina subsidiary bank will
hold quarterly meetings for one year beginning six
months after the Effective Date with representatives of
the concerned groups to monitor implementation of this
undertaking . If the needs assessments provided for in

Paragraph 1 of this undertaking are not substantially
completed at the expiration of a one year period

beginning six months following the Effective Date , then
the monitoring period will be extended for one

additional quarterly meeting .

Such representatives

will respond to any inquiries from the Federal Reserve
Board , community based organizations or any other
persons or groups regarding first Union CRA compliance
efforts as embodied in this undertaking .

6

105

Annex 1 to Undertaking by First Union

1.

North Carolina Housing Finance Agency /Home Mortgage Loan Program
This program is for improvements in homes 15 to 20 years old
secured by second mortgages . First Union buys an N.C. Housing
Finance Agency Bond , the agency makes loans, processes the
loans and services them .

Loan amounts range from $ 5,000 to

$ 15,000 over three year periods. · The funds are utilized for low to
moderate income families to purchase the homes or improve them .
Various cities in the state can and do participate and reduce
the Interest rates on loans with federal funds .

As of September

1984 approximately 30 loans totaling $ 2.3 million in bonds had
been issued under the Home Mortgage Loan Program . In addition ,
First Union has outstanding with the agency $ 3.8 million for
constructing or renovating multi- family rental housing complexes
20 % of such housing having been allocated to low and moderate
income families .
2.

First Union is involved in several neighborhood housing service
This is a cooperative city -neighbortiood
business group for home improvement lending to low and moderate
income families . One such projeca , Plaza /Midwood in Charlotte
groups in North Carolina .

in which First Union worked with two other banks and committed

$ 3 million to the project .

Loans were below market rates and

were available to first time homeowners .

3.
Approximately 10 years ago First Union joined with 19 other
companies in the Greensboro , North Caroline community and
formed the Greater Greensboro Housing Foundation to develop
low income housing as an alternative to public housing . Firsi
Union also provided some of the capital to the foundation .

First Union's regional executive in the Greensboro area has
served as a director of the foundation since its inception ,

and served as an officer as well for five years . That foundation
has developed more than 3,000 living units in Greensboro
and surrounding areas .
4.

In Winston Salen , North Carolina First Union has committed
seed money and loans to a newly organized non - profit organization

to provide financing and other assistance for low income housing .
.
s

Financing was arranged through Cameron - Brown Company , a
First Union subsidiary , in 1983 for $ 14.6 million tax -exempt

finandng for two apartment complexes being rehabilitated in
Charlotte , North Carolina .

These are the first 100% for income

housing projectsin North Carolina Insured by the Federal Housing
Administration ( FHA ) that were not federally subsidized . First
Unfon approached the City of Charlotte which was very interested

In finding a way to save Double Oaks Apartments and Tryon Hills

Apartments and still keep rents relatively low . The Chariotic City
Council acted as redevelopment commission and issued tax - exempt
bonds based on 9.58 morigage rate for Double Oaks and a 9.258
rate for Tryon Hills . The term of the mortgages is 40 years .

106

Double Oaks is a 570 unit complex . The mortgage of $ 9.68
million is insured under FHA Section 221 ( d ) ( 4) of the National

Housing Act and is scheduled for completion in 1986. Tryon
Hills is a 257 unit complex .

The mortgage of $ 4.9 million is

also FHA insured and the complex was completed in 1984 .
6.

7.

First Union has provided urban development loans to 22 cities
in North Carolina, totaling $ 23 million .
First Union has participated in 13 Farmers Hor ... Administration

apartment complexes , totaling $ 1.7 million .
8.

Outstanding industrial revenue bond financing within the State
of North Carolina originated within the last two years, totaled
$ 66.7 million .

9.

These foregoing are but a very few examples of First Union's
efforts in community support in the lending areas it services ,

107

UNDERTAKING

In response to expressed concerns of certain community groups ,
First Union renews its dedication and commitment to the communities in

which it does business and to the Community Reir

2013 Act .

First

Union has a long and proud tradition of active leadership in the communities
and state in which its offices are located .

As First Union expands

into Florida , it believes it is important to carry forward this tradition
and to that end makes the following statement :

1.

First Union , through its subsidiary bank , will conduct
community needs assessment studies in certain
metropolitan areas of Florida where it conducts its
banking operations or into which it expands in Florida ,
seeking to determine banking product and credit needs

of low and moderate income groups and minorities within
these areas .

These studies will be conducted by First

Union or by third party consultants under contract to
First Union .

The order of priority for these studies

will be determined by First Union and the studies will
include input from community based organizations ,

community development organizations and other interested
or concerned parties .

The studies will commence within four

months of the effective date of First Union's acquisition of

Atlantic Bancorporation ( the " Effective Date " ) and will be completed
within a reasonable period of time thereafter .
areas for needs studies are the Tampa

-

Targeted

St. Petersburg area ,

108

the Orlando area , the Daytona Beach area and Broward
and Northern Dade Counties .

2.

First Union , through its subsidiary bank , will use its
best efforts to inform low and moderate income groups

and the minority communities of its basic banking ,

lending programs and other services .

This effort will

include innovative advertising and marketing efforts
directed toward low and moderate income groups and

minority communities .

For instance , the commercial

call program of the Florida subsidiary bank will include

minority businesses and community development agencies
and corporations .

First Union will use its best efforts

to employ minority advertising or marketing firms to

assist in implementing these advertising and marketing
efforts with the goal that no less than 10% of

the contracts to outside suppliers used by the subsidiary
bank in these efforts be awarded to minority advertising
or marketing firms .

3

3.

( a)

First Union further acknowledges concerns expressed
with respect to the need for innovative lending

programs for minority business enterprises , home
mortgage lending and neighborhood and residential

rehabilitation lending .

First Union has long supported

such programs in North Carolina and pledges to provide
support for such programs itself or through its

109

subsidiary bank in Florida .

The projects listed

on Annex 1 are examples of the types of programs
First Union has supported with leadership , volunteer

commitment and funding in partnership with community
development corporations, state and local development
agencies and other representative groups and agencies .
This type of community support is indicative of First
Union's commitment to its communities and with which
it has a long history in the State

North Carolina

First Union will seek opportunities in its market area
in Florida to provide similar community support .

( b)

First Union agrees to make every reasonable effort to
conduct a loan program which is responsive to the

growing credit needs of the low and moderate income
areas of its Florida subsidiary bank's market areas .
This program is intended to provide loans which are
targeted for low and moderate income housing , small

business and commercial real estate projects.

The program

will be active within those portions of municipalities of
Florida which have median household incomes equal
to or less than 80% of the median household income

for the SMSA in which such municipality is located .

The bank will use its general underwriting criteria ,
terms and conditions in this program and will use
its best efforts to be as flexible as possible in applying

-3

110

such standards . Within the bounds of prudent lending

practices and safe and sound banking operations, the
bank will make reasonable efforts to c : ualify loan requests

presented to the Bank pursuant to this program .
Elements of a successful program will include :
( i)

home mortgages ,

1 to 4 family structures

home improvement loans ,

( ii )

Housing Development loans

construction

and rehabilitation loans and permanent mortgage

financing to be made available to non - profit
and other developers for new construction and

rehabilitation of housing for low and moderate
income and minority residents in qualifying areas .

Every effort will be made to approve loan requests
under this program only for developments that do
not displace residents without offering suitable
replacement housing .
( iii )

Small Business loans

For businesses with under

$ 5 million in annual sales in qualifying areas .
Loan categories will include building construction ,
building improvement , machinery / equipment, and
working capital .
The bank will endeavor to make favorable pricing available
on loans under this program .

The bank may seek other banks

to participate in the program and seek government and
alternative resources such as grants , loan guarantees

or interest write downs in this program .
-4

111

( c)

First Union recognizes the importance of community
development corporations to the economic development
of Florid

and will provide both financial support and

technical assistance to such corporations. Such support
may be in conjunction with other banks or companies ,

or in cooperation with non -profit organizations or state
and local agencies . Financial support may be in the
form of investment or contributions by First Union
or its bank subsidiary in Florida .

( d)

Supplementing the effort will be a minority enterprises
lending policy providing that any lending officer may

approve a minority enterprise loan within his or her
lending limit with the further proviso that in order for

a minority enterprise loan request to be turned down
the concurrence of at least two lending officers will be
required .

In addition , each city office in Florida will

designate at least one lending officer to be responsible
for monitoring the availability of minority loan programs
to assist the bank or minority businesses .

Further , the

banks credit training programs will include information pertaining
to its policy regarding loans to minority businesses so

that appropriate personnel will be aware of the bank's
objectives in this area .

Through affirmative education and

information programs loan officers and other bank officers

will be kept advised of their responsibilities under the
Community Reinvestment Act and fair lending practices
laws .
-5

112

( e)

Management assistance , such as legal advice , account

services and technical expertise from private industry
is essential to continued viability of borrowers .

Bank

officers will be encouraged to develop management
assistance teams in their communities to assist minority

business enterprises .

In addition , technical assistance

will be provided by bank personnel to community development
corporations in areas such as loan packaging , market
analysis and financially related areas .

( f)

Each city office will have access to a lending resource
person whose principal responsibility is to assist bank
lending officers , customers and potential customers
with such programs as :
( i)

Small Business Administration loan programs and
certified development company programs ;

( ii )

Neighborhood Housing Services Programs;

( iii ) Urban Development Action Grants ;
( iv ) Community Development Block Grant Programs
for housing and economic development ;
( v)

Specialized state and county mortgage programs; and

( vi )

Other minority or government loan programs
available to the bank's customers .

-6

113

4.

In an effort to further improve communications between First

Union's subsidiary bank in Florida and low and moderate

income groups and minorities, tie subsidiary bank will seek
individuals to elect to its city advisory !wards from low and
moderate income groups , minority groups or other community

involved groups, which are re; 'esentative o ' low and moderaie
income groups and mino.ity groups .

These efforts will begin

within four months of the Effective Date and at least one such

individual will be elected to each advisory board with a goal
of accomplishing this within 18 months of the Effective Date .

5.

It will be the policy for annual reviews of the Florida

subsidiary bank's Community Reinvestment Act Statements
to be an agenda item on each city advisory board agenda at
least three months before such statements are reviewed for

annual re- implementation by the subsidiary bank's general
board of directors and management .

6.

First Union will continue the same commitment towards

charitable giving that it has employed in North Carolina .

First Union evaluates individual applications for contributions
and makes decisions regarding them after considering need
and potential for positive impact , financial responsibility and

similar related factors . An important part of First Union's
commitment to community services is a desire to assist the

needy and handicapped , paying particular attention to the
needs of community oriented and community based organizations .

-7

114

7.

First Union supports the concept of providing " life - line " or
basic banking services on a reduced cost basis , directed
towards low income groups and senior citizens and will
continue its efforts to bring " life - line" or basic banking services
to market .

8.

As First Union expands into Florida by acquisition ,
First Union will engage in an evaluation of the credit and

underwriting criteria of the acquired bank and the
credit needs of the community in which the bank is located .
First Union's evaluation of the criteria will be based upon its
own past experience in establishing and implementing such
criteria , safe and sound banking practices and will reflect

the input and experience of the acquired bank as well as
input from the communities served by the bank through

the community needs assessments performed by First
Union .

First Union believes that financial institutions can properly
and usefully play an important role in assisting low and moderate
income borrowers and customers through the support of credit
counseling and similar consumer services offered by third
parties .

First Union will seek ways to support community based

non- profit counseling services financially and with volunteers .

10.

First Union acknowledges the usefulness of open dialogue

and increased understanding produced by meetings ,
-8

115

conferences, seminars and other forms of group communication .
First Union is interested in maintaining an open and continuing
dialogue with community groups and others following its

To facilitate the communication process ,

expansion into Florida .

the bank will provide a publicly disclosed system by which

individuals , community oriented groups , low and moderate
income groups and minorities can communicate their concerns

directly to a bank officer with the responsibility for making
these concerns known at appropriate levels of management
within the bank .

11 .

First Union or its Florida subsidiary bank will hold quarterly
meetings for one year after the Effective Date with representatives

of the concerned groups to monitor implementation of this undertaking .
If the needs assessments provided for in Paragraph 1 of this
undertaking are not substantially completed at the expiration
of one year following the Effective Date then the monitoring

period will be extended for one additional quarterly meeting .
Such representatives will assist First Union in presenting its
compliance efforts to other concerned groups or parties should
further questions be expressed with respect to First Union's
or its subsidiary bank's CRA compliance in Florida .

-g

116

Annex 1 to Undertaking by First Union

1.

North Carolina Housing Finance Agency !Home Mortgage Loan Program

This program is for improvements in huines 15 to 20 years old
secured by second mortgages . First Union buys an N.C. Housing
Finance Agency Bond , the agency makes loans , processes the
loans and services them .

Loan an: ounts range from $ 5,000 to

$ 15,000 over three year periods . The funds are utilized for Ic
moderate incrime families to purcha : 2 thu homes or improve them .
Various cities in the state can and do participate and recuce
.

the interest rates on loans with federal funds .

to

As of September

1984 approximately 30 loans totaling $ 2.3 million in bonds had
been issued under the Home Mortgage Lean Program . In addition ,
First Union has outstanding with the agency $ 3.8 million for
constructing or renovating multi- family rental housing complexes
20 % of such housing having been allocated to low and moderate
income families .

2.

First Union is involved in several neighborhood housing service
groups in North Carolina .

This is a cooperative city -neighborhood

business group for home improvement lending to low and moderate
income families .

One such project , Plaza / Midwood in Charlotte

in which First Union worked with two other banks and committed

$ 3 million to the project .

Loans were below market rates and

were available to first time homeowners .
3.

Approximately 10 years ago First Union joined with 19 other
companies in the Greensboro , North Carolina community and
formed the Greater Greensboro Housing Foundation to develop
low income housing as an alternative to public housing . First

Union also provided some of the capital to the foundation .
First Union's regional executive in the Greensboro area has
served as a director of the foundation since its inception ,
and served as an officer as well for five years .

That foundation

has developed more than 3,000 living units in Greensboro
and surrounding areas .
4.

5.

In Winston- Salem , North Carolina First Union has committed
seed money and loans to a newly organized non -profit organization
to provide financing and other assistance for low income housing .

Financing was arranged through Cameron-Brown Company , a
First Union subsidiary , in 1983 for $ 14.6 million tax - exempt

financing for two apartment complexes being rehabilitated in
Charlotte , North Carolina . These are the first 100% low income
housing projects in North Carolina insured by the Federal Housing
Administration ( FHA ) that were not federally subsidized . First

Union approached the City of Charlotte which was very interested
in finding a way to save Double Oaks Apartments and Tryon Hills
Apartments and still keep rents relatively low . The Charlotte City
Council acted as redevelopment commission and issued tax - exempt

bonds based on 9.5 % mortgage rate for Double Oaks and a 9.25 %
rate for Tryon Hills . The term of the mortgages is 40 years .

117

Double Oaks is a 570 unit complex .

The mortgage of $ 9.68

million is insured under FHA Section 221 ( d ) ( 4 ) of ihre National

Housing Act and is scheduled for completion in 1986. Tryon
Hills is a 257 unit complex . The mortgage of $ 4.9 million is
also FHA insured and the complex was completed in 1984 .

.
6

First Union has provided urban development loans to 22 citius
in North Carolina, totaling $ 23 million .

7.

First Union has participui.d in 13 Farmers Home Administration
apartment complexes , totaling $ 1.7 million .

8.

Outstanding industrial revenue bond financing within the State
of North Carolina originated within the last two years , totaled
$ 66.7 million .

.
9

These foregoing are but a very few examples of First Union's
efforts in community support in the lending areas it services .

118

ATLANTA MORTGAGE CONSORTIUM

Contact :

For Immediate Release :

Jim Mynatt

June 17 , 1988

588-8737

MORTGAGE CONSORTIUM READY FOR BUSINESS ;
TWO PROJECTS , ADVISORY BOARD ANNOUNCED

ATLANTA , GA .

The Atlanta Mortgage Consortium ( AMC) will be ready to

receive and process mortgage loan applications starting Monday , June 20 at 55
locations , 23 with Saturday hours . Formed by nine Atlanta financial institu
tions , which together have committed a mortgage loan pool of $ 20 million , AMC

has completed its start up preparations and the training of personnel to
handle applications .

subdivision .

119

ATLANTA MORTGAGE CONSORTIUM

2

June 17 , 1988

" These two programs represent a major commitment by the Consortium to

apply its $ 20 million in resources to upgrade deteriorating housing in some
areas of the city , as well as to develop new housing to make home ownership
more affordable for more of our citizens, " said James G. Mynatt , spokesman
for the Consortium .

120

ATLANTA MORTGAGE CONSORTIUM

- 3 -

June 17 , 1988

of Atlanta Department of Community Development ; Fulton County Commissioner
Michael Hightower ; Jonathon Jones , Executive Director , S.E. Reinvestment
Ventures , Inc .; Noel Kahil , President , Gibraltar Land Inc .; Robert D. Lupton ,
Executive Director , Family Consultation Services , Inc .; Craig Taylor , South
Atlanta Land Trust , and two representatives from DeKalb County to be named .

121

ATLANTA MORTGAGE CONSORTIUM

Locations Accepting AMC Mortgage Loan Applications
* indicates Saturday hours

BANK SOUTH , N.A.

Main Office , 55 Marietta Street
Contact : Carey Russell , 529-4821
* East Point Office , 1733 Washington Avenue

* West End Office , 638 Evans Street , S.W.
* Decatur Office , 163 Clairmont Road

East Atlanta Office , 411 Flat Shoals Avenue , S.E.
Contact : Diane Robinson , 584-6705
THE CITIZENS &

SOUTHERN NATIONAL BANK

* South DeKalb Office , 2850 Candler Road

East Point Office , 2818 East Point Street
Contact : Charles Sweat , 763-0381

* Cascade Heights Office , 2358 Cascade Road , S.W.
CITIZENS TRUST BANK

Main Office , 75 Piedmont Avenue

Contact : Alan Bouknight or Joan Sarden , 653-2708
FIRST AMERICAN BANK OF GEORGIA

West End Office , 874 Gordon Street
Contact : Wyatt Davis or Stephanie Willians , 752-8400
* Old National Office , 4803 old National Highway

Five Points Office , 34 Peachtree Street , N.W.

Contact : Elaine Hamby , 584-1500
* Wesley Chapel Office , 2555 Wesley Chapel Road
Moreland Office , 1401 Moreland Avenue , S.E.

Contact : Joe Dunaway , 624–7500

122

- 2 -

THE FIRST NATIONAL BANK OF ATLANTA

* Campbellton Plaza Office . 2098 Campbellton Road , S.W.

* Greenrbiar Office , 2841 Greenbriar Parkway , S.W.
* South DeKalb Office , 2782 Candler Road

* Stewart - Lakewood Office , 2891 Lakewood Avenue , S.W.

* West End Office , 612 Lee Street , S.W.

Buckhead Office , 3040 Peachtree Road , N.W.
Contact : Sharon Schafer , 841-7941
Gwinnett Place Office , 2170 Pleasant Hill Road , Duluth

Contact : Jane Ferguson , 476-0472
Lawrenceville Office , 279 W. Crogan Street
Contact : Mary Luweli , 963-8111
Main Office , 2 Peachtree Street , N.W.
Contact : Gladiola Worthem , 332-6355
Mansell Road Office , 10825 Alpharetta Highway , Roswell
Contact : Billie Adsher , 642-8384
Peachtree Corners Office , 6925 Jimmy Carter Blvd. , Norcross
Contact : Jane Ferguson , 368-1523
Riverdale Office , 591 Valley Hill Road , Riverdale
Contact : William Kramer , 994-0380
FIRST UNION NATIONAL BANK OF GEORGIA

* East Point Office , 2791 East Point Street , S.W.

Airport Office , 1001 Virginia Avenue , Hapeville
Contact : Brend

Darnell , 766-6200

* Hapeville Office , 590 s . Central Avenue
Chapel Square Office , 4825 Flat Shoals Road , Decatur
Contact : Dave Neal , 987-1222

old National Office , 5120 old National Highway , College Park
Contact : Jo Anderson , 761-8031

123

- 3 -

FULTON FEDERAL SAVINGS AND LOAN ASSOCIATION

Main Office , 21 Edgewood Avenue
Contact : Henry Armstrong , 586-7073
East Point Office , 2860 East Point Street
Contact : Ronnie Burch , 763-4910

* Old National Office , 5440 Old National Highway , College Park
* Fayetteville Office , 685 North Jeff Davis Drive

GEORGIA FEDERAL BANK

* College Park Office , 3581 Main Street

Five Points Office , 20 Marietta Street , N.W.
Conact : Nancy Hill , 588-2660
* Greenbriar Office , 3080 Campbellton Road , S.W.
Midtown Office , 1124 Peachtree Street , N.E.
Contact : Tim Fitzgerald , 898-1710
Peachtree Center Office , 241 Peachtree Street , N.W.
Contact : Angie Woodward , 588-2488
* South DeKalb Office , 2851 Candler Road , Decatur
* Stewart - Lakewood Office , 2085 Stewart Avenue

West End Office , 921 Gordon Street
Contact : Clyde Mitchell , 752-1800
TRUST COMPANY BANK

Chattahoochee Office , 1221 Chattahoochee Avenue , N.W.
Contact : Jean Wilson , 350-5101
.

* Forest Park Office , 3900 Jonesboro Road , S.E.

Executive Park Office , 1 Executive Park Drive , N.E.
Contact : Diane Baker , 728-1212

Fulton Industrial Office , 711 Fulton Industrial Blvd. , N.W.
Contact : Margie Elliott , 699-3991
Greenbriar Office , 3170 Greenbriar Parkway , S.W.
Contact : Cynthia Hall , 344-8401

o

ga

124

- 4

TRUST COMPANY BANK ( Continued )
Lakewood Office , 1700 Lakewood Avenue , S.E.

Contact : Leon Norton , 624-2982
Main Office , I Park Place , N.E.
Contact : Martha Simmons , 588-8286

Mortgage Loan Division , 5008 Buford Highway , Chamblee
Contact : Sharon Clark or Charles Williams , 454-3566
Panola Road Office , 2843 Panola Road , Lithonia

Contact : Dan Bailey , 593-5451
* South DeKalb Office , 2731 Candler Road , Decatur
* South Fulton Office , 5150 Old National Highway , College Park
West End Office , 670 Stweart Avenue , s.w.
Contact : Linda McAdoo , 752-1991

125

The CHAIRMAN . Thank you very much, Governor Johnson.

STATEMENT OF ROGER F. MARTIN , BOARD MEMBER, FEDERAL

SPECIALIZED EXAMINERS

We definitely support, and I personally support, the idea of spe
cialized examiners . We are currently evaluating that approach . We

are concerned about — or actually are opposed to the comparative
rating system . This provision would require a comparison of simi
larly sized institutions serving very different communities. Need

126

less to say , a $ 100 million asset institution in McLean , VA is differ
ent than an Oshkosh , WI -- our home State, Senator — thrift.

>

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-8

-9

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131

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-11

-10

supported
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Bank
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with
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Financial
Services
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C
Subtitle

industry
thrift
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have
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132

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the
fulfill
to
in
institutions
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other
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urge
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check
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e

Sections
421
427
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.
member
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institution
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Subtitle
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433
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made
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-13

-12

requirements
notice
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At
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133

tool
au
percentage
annual
shopping
primary
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yield
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institutions
E
"in
entitled
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The
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ence
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Subtitle
- ruth
E
Savings
T
in

Sections
441
through
453

Subtitle
--Home
Loan
Requirements
Equity

consistently
Board
Bank
The
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444
House
the
fnd

Sections
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461
467

Bank
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11

substantially
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VI
Title
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ubsequently
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ate
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-14

,w1987
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ignificant
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recommendation

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experience
recent
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Act
and
Availability
Funds
Expedited
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comply
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mortgages
ate
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enacted
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18
to
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aconsiderable
puts
months
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burden
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cumulative

institutions
.financial
Technical
Matters

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staff
your
.

134

135

The CHAIRMAN . Thank you, Mr. Martin .
Mr. Martin , don't you come originally from Columbus, WI ?
Mr. MARTIN . Cincinnati.

STATEMENT OF L. WILLIAM SEIDMAN, CHAIRMAN , FEDERAL

MIRAGE CONSUMERISM

First, we believe a good part of the H.R. 5094 really represents
mirage consumerism , and that is defined as an effort to correct a

problem that doesn't exist. This is so at least as to almost all the
banks for which we are the principal regulator.

136

In the Community Reinvestment Act area, our experience and
record shows that banks have complied , to a very significant

extent, with existing law . The small number of consumer com
plaints and protests we have received and few public comments we
have found in the banks' CRA public files support this finding.

137

Our third point, Mr. Chairman , is that many of the title provi

sions would place banks in an unfair position vis - a -vis financial
service competitors by requiring banks to incur costs not required
by their competitors.

Mr.
morning
.Good
Committee
the
of
members
and
Chairman

Iam
pleased
to

TESTIMONY
OF

views
offer
Deposit
of
Federal
Corporation
Insurance
the
on
various
provisions
-related
consumer
IV
Title
in
Institutions
Depository
the
of
Act
TIV
,Hitle
(1969
.R.
").5094

SEIDMAN
WILLIAM
L.

Introduction

several
amend
would
IV
Title
consumer
banking
existing
-related
and
laws
ON

Samend
anTitle
.establish
ones
new
of
pecifically
umber
would
,the
Reinvestment
Community
the
substantially
(CRA
1977
");rAct
of
each
equire
to
agencies
regulatory
bank
federal
the
aseparate
establish
division
DH.R.
OF
IV
,TITLE
5094
EPOSITORY
1988
ACT
INSTITUTIONS

applicable
with
compliance
nforce
protection
;consumer
laws

and
examine

offer
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to
efforts
outreach
our
up
stepped
have
allows
system
present
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comments
public
CRA
our
reach
to
.Wfor
examiners
e

.Dwith
bankers
,wconsumers
1988
and
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sessions
two
held
euring

organizations
community
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encourage
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CRA
submit

in
organizations
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civil
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regulations
CRA
where
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consumer
other
and
laws
elated
.are
addressed

143

provide
agencies
banking
notice
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RA
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-12

-13

Account
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144

.
account
banking

costly
unduly
and
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consumers
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Opportunity
Credit
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Title
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.1-5

-14

notices
action
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145

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-16

tAdditionally
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and
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you
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.
questions
any
to
respond

146

Attachments

147

A
Aboardix

a

UNIFORM INTE

ENCY

Rating ( 1) – The institutions in this group have a strong

COMMUNITY REINVESTMENT ACT ( CRA)
ASSESSMENT RATING SYSTEM

record of meeting community credit needs. Born tne
board of directors and management take an active pan
in the process and demonstrate an affirmative commit
ment to the community. Institutions receiving this rating
normally rank high in all performance categories. Such

Introduction
The purpose of the rating system is to provide a uniform
means for regulatory agencies to identity quickly those
institutions which require varying degrees of en.
couragement in helping to meet community credit
needs. This provides a comprehensive and unitorm

institutions have a commendable record and need no

turther encouragement.
Rating ( 2 ) - Institutions in this group have a satisfac .
tory record of helping to meet comriunity credit needs
Institutions receiving this rating normally are ranked in
the satisfactory levels of the pertormance categories
Institutions in this category may require some en .
couragement to help meet community credit needs.
Rating ( 3 ) - Institutions in this group have a less than
satisfactory record of helping to meet community credit
needs. The board of directors and management have
not placed strong emphasis on the credit needs of the
community. Institutions receiving this rating have mixed
rankings surrounding the mid -range levels of the per .
formance categories. Such institutions require en .
couragement to help most community credit needs.

system for evaluating theperformance of federally regu .
lated financial institutions examined under the various

assessmeni factors of the Community Reinvestment
Act and facilitates more unitorm and objective CRA
ratings.
The rating system ranks financial institutions on a scale
from 1 through 5 with a " 5" representing the lowest level
of portormance under the Act and, therefore, the high
est degree of concern . Lovel 3 reflects portormance
which is less than satistactory.
This system furthor omploys fivo “ performance cat.

Rating ( 1) - Institutions in this group have an un.

egories' or components from which the overall com

satisfactory record of helping to meet community credit
noods. The board of directors and management give

posite CRA rating is derived . The portormanco cat.

ogonios represent a grouping of the various assessment
factors contained in the implementing regulation for the

inadequato consideration to the credit needs of the
institution's community. Institutions receiving this rating
generally rank below satistactory in the majority of the
performanco categorios. Such institutions require

Act. Each portormance category is evaluated on a
scale of 1 to 5 with a '5' representing the lowest level
and thorofore the worst portormance. As explained
lator, each portormance category includes a narrative

strong encouragement to help meet community credit
noods.

description for oach rating lovel.
Institutions in this group have a sub
Rating ( 5 )
stantally inadoquate record of helping to meet commu
noods.
The board of directors and manage
credit
nity
mont appear to give little consideration to the credit
needs ofthe institution's community. Institutions receiv .

Overview
Each financial institution is assigned a composito CRA

rating that is based upon the institution's portormance in
mooting various community credit noods.An examiner

ing this rating generally rank in the lowest levels of the
portormanco Catogorios. Such institutions require the
strongest encouragement to be responsive to commu.

begins to ovaluate the institution's record in mooting

financial
community credit noods by first reviewing its
local acon

condition and size, logal impodimonts, and

nity credit noods.

omic conditions, including the competitive environment
in which it operates. The type of community in which the

Portormance Categories
For purposes of evaluating an institution's CRA per.

institution is located will also have a significant bearing
on how the institution fulfills its obligations to the com

formance the various assessment factors and criteria
aro grouped into the following " portormance cat

munity. Community credit noods will ohon ditter with the
specific characteristics of onch local community, ro
sulting in a variety of ways an institution may most those
noods. To maintain a balanced perspective examinars
must carotully consider intormation provided by both
the institution and the community .

egories " :
I. Community Credit Noods and Merketing

Composite Rating
The pertormance categories are individually assigned a
numeric rating . In assigning the overall composito CRA

rating, the performance categories will be weighod and
ovaluated according to howwell the institution moats
the doscnptive characteristics listed below .
Appendix A

5

Raong Systems ( 12-86 )

148

А
Adoondiz

types and amounts of credit extended to the com .

reach all segments of its community. Community

munity and the degree to which those extensions

segments should include low• and moderate .

are , in fact , helping to meet the community s needs.
Included in this category are assessment factors ( i )

income residents . small businesses and . where

applicable. owners of small farms . Management
has also established working relationships with real
estate brokers and others who serve low . and
moderate -income areas and who may provide as .

sistance for small or minority businesses. There is
evidence that senior management is awa'e c

community concerns and activities.
The institution has undertaken
Rating Level 2
activities to determine its community's credit needs
As a result of these activities, the institution is gen .

erally aware of the credit needs within its commu.

nity, including low , and moderate - income areas .
The institution has initiated a dialogue with commu .
nity representatives such as local government .

noighborhood , religious, and minority organ .
izations, or small business and small farm organ
izations. The institution has undertaken marketing
and credit related programs but the programs are
not ongoing or comprehensive. Senior manage
mont demonstrates an awareness of community
concerns and activities.
Rating Lovol 3 - The institution's activities to de

tormine community credit noods are limited. The
institution's employoos may serve as volunteers on

Portormance Category Ratings
1. Community Credit Needs and Marketing

community organization boards and committees.
Howover, the institution has notestablished a syste
matic method to determine how or ii its employees
volunteerism assists the institution in meeting its

CRA goals. The institution's advertising may be
principally deposit oriented. In addition , the insti

tution generally has made no ottons to market its
services on an equal basis to all segments of its
community. Marketing and credit related programs
do not include a mechanism for roaching low . End
modorate-incomo areas within the dolinoated
.

community . The institution's marketing effort does
not adequately focus on marketing the types of
credit for which the institution has identified a neod
( or a neod is otherwise apparent) . There may also

be somo concern about the community delineation .
Rating Lovel 4 – The institution's efforts to deter.

mino community credit noods are very limited and
fail to address major segments of its community .
Management has not established a dialogue with
organizations roprosentative of the community, in.
cluding any which represent low- and moderato
income or minortty neighborhoods within the do
lineatod community. The institution's marketing and
credit related programs are limited or poorly con
ceived. There may also be some concom about the
community dolineation. Senior managemont is un
awaro of special noods of low- and moderate

income residents, small business and small farms.
Rating Lovel5 - Tho institution has not undertaken
any moaningtui offorts to determine community
Appendur A

Radng Systems ( 12-46 )

149

A
Appercix

credit needs. Management has limited knowledge
regarding the community's demographic charac
teristics. The institution's marketing and credit re
lated programs are either non -existent or have re
peatedly excluded low. and moderate - income ar.
eas within the delineated community. There may
also be some concern about the community de

moderate -income areas. Its participation in private .
as well as government insured. guaranteed or sub
sidy loan programs is either pretunctory or none .
xistent, under circumstances where the need for
such loans has been idenufied and the lender can

articulate no objective supportable reason for its iow
level of participation .
Rating Level 5 The institution is unwilling to adapt
its credit offerings to serve demonstrated unmet
credit needs in its community . Daticularly for hous .

ing . small business or small farm credit. This raling
would be particularly appropriate where the lende ! s
failure to meet these needs was cited in a previous

Appendur A

Rading Systems ( 12-46 )

150

A
Apoondix

Rating Level 3 – The geographic distribution of the
-

Rating Level 3

The institution is in less than

institution's credit extensions, applications and den .

satisfactory compliance with antidiscrimination and

ials may suggest unreasonable lending patterns.
Management has not antempted to review its lend .
ing policies and procedures or to analyze the insti .
tution's lending patterns within its community . Tlie
institution s reco's of opening and closing offices
ar d its provision for services at its offices may
indicate a disparity of treatmeni between contain
areas within ! s community. Such a disparity is iso

other credit laws .

Rating Level 4

lated and not an overall intentional pattern or prac.

tice. Management has plans to undertake immedi
ate steps to restore reasonably equal service to any
attected areas .

The geographic distribution of
Rating Level 4
credit extensions, applications and denials reveal
unreasonable lending patterns. particularly in low
and moderate - income neighborhoods or areas of
racial/ethnic concentration . The geographic dis.
tribution of applications may indicate a possible
pattern or practice of discouraging or illegally pre
screening applications. The institution's record of
opening and closing offices and the provisions of

services at its offices may suggest a pattern of
disparate treatment of minority or low . and
moderate - income neighborhoods . The record

might portray an institution that has systematically
sought to close or curtail services at offices serving

minority or less affluent neighborhoods while open
ing new offices in developing, majority or upper.
income areas .

The geographic distribution of
Rating Level 5
credit extensions, applications and denials rovoals
-

extensive , systematic, and unreasonable londing
patterns. The institution has adopted loan policios
and procedures. Such as unjustifiably high minimum
mortgage amounts or down payments or restric.

tions based on the age of property , which have or
can reasonably be expected to have a significantly
adverso impact on loan availability in low- and

moderato -income or minority neighborhoods.The
institution's record of opening and closing offices
and the provision of services at its offices suggest a
continuing pattern of disparato treatment of minority

or low. and moderato -income neighborhoods.
Where this was proviously cited , management has

Appendix A

Rating Systems ( 12-46 )

151

A
Appendix

covered previously, to help meet community credit

Rating Level 5

noods. Management may be unaware of the CRA

regulations ' encouragement of institution in.
volvement in community developmentir @ .
development programs.

Appender a

Rating Systems ( 12-46 )

Council
Eumination
Institutions
Financial
Federal
-2

adaptation
suchU
While
be
may

to
response
necessary

competitive

,considerable
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concern
developed
has
potential
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about
of
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2000
D
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1776
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ashington
WC

effectively
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or
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and
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safe
small
for
Services
Financial
Basic
on
Statement
Policy
Joint

availability
credit
Because
savings
dependent
often
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on
.
account
an
inancial
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ccess
low
for
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to
-iwith
ncome
,Federal
System
Reserve
Federal
the
Governors
of
Board
The
Deposit

State Bank

Supervisors
National
,

Associatio
n State
of

.may
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young

Board
,NHome
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Fational
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Bank
Loan
ederal

ishad
While
ignificant
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Office
,CAdministration
currency
Comptroller
the
of
onference

research
,some
studies
declines
reflect
ownership
account
in
may
that

Credit Union

bexample
,For
etween
1977
concern
for
cause
proportion
1983
and
.be
the
of

National
Loan
,and
and
Savings
State
of
Association
Supervisors

by
headed
having
•yfamilies
person
accounts
,ichecking
decreased
sounger

tride
of
efforts
the
encourage
to
statement
policy
joint
this
1ssuing
are

number
families
lowest
the
rfrom
,did
group
income
egardless
age
.of

individual
and
associations
of
offering
the
regarding
institutions
depository

young
of
proportion
The
having
or
isfamilies
either
Icavings
hecking
cause
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while
.
declined
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account
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these
of
always
not
is

,the
asclear
that
suggest
do
surveys
or
individuals
of
number
ignificant
increased
from
competition
years
,dchanged
to
part
in
ue
few
past
the
over

152

financial
services
"b.' asic

dfamilles
aeposit
have
not
relationship
kind
any
of
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,increased
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Institution
depository
traditional
the
outside
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.
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153

offering
the
promote
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services
onsistent
safe
with
and

154

The CHAIRMAN . Thank you very much, Chairman Seidman .

DELAY IN ESTABLISHING SECURITIES SUBSIDIARIES

According to an ABA Commission analysis, the House bill would
delay the ability of bank holding companies from establishing secu
rities subsidiaries by as much as 2 years. This stems from the rule

making process required for adopting new CRA rating standards
and from the subsequent exams.

ess .

There is a 45 -day comment period that only begins after exami
nations have taken place and after the applicant has had to under
take newspaper advertising in various local communities. In some

cases this may mean a prolonged period before the comment period
could even start. Then there is the 45 -day public comment period,
and then beyond that there is the possibility of extensions on com
ments. Once that process has been finished and the application has
been reviewed and decided, there is still a follow -up process for cer
tain cases which could extend easily into a 2 -year period before ev
erything is final.

155

We are sympathetic to the social objectives sought through the various provisions
of title IV . We have serious concerns, however, that those provisions, particularly
when taken in the aggregate, might jeopardize the safe and sound operation of

many smaller banks where the implementation costs of these new provisions could
be quite onerous.

EXEMPTIONS FROM CERTAIN EQUAL CREDIT OPPORTUNITY ACT

>

90-163 0 - 88 - 6

156

rights every time a transaction takes place, especially in the busi
ness creditarea, because of things like trade financing and special
large transactions.

157

As I mentioned in my opening statement, doesn't a rating system
like that sort of guarantee that you get put in the old bell curve?
Some of them you just simplyhave to say are not performing be
cause they are not doing as well as some others; they are still doing
a good job but you may get half of them on the bottom of that bell
curve ?

DECLINE IN NUMBER OF FAMILIES USING THE BANKING SYSTEM

Mr. Johnson , I wonder if that statement coincides with informa
tion available to the Federal Reserve System and, if so, what is the

explanation for that declining percentage of American families
using the banking system ?

158

have constantly resisted the notion of a specific requirement at a
fixed price.

a

159
As I stated in my testimony, I believe our examinations involve looking at both;

that is, both process and performance. However, it is not our policy to require banks
to make particular kindsof loans or specified amounts in a given area in some rela
tionship to the demographic makeup of that area. That, in my opinion , would be a
form of credit allocation, which the Board has long held is properly a legislative
function rather than a function of this or any other agency to take upon itself.

160

As I said , we have not completed the Detroit assessment, and we

would be happy to communicate our findings when we do.

OPPOSITION TO PUBLIC DISCLOSURE OF CRA RATINGS

Mr. Seidman , in your testimony, you oppose public disclosure of
the Community Reinvestment Act ratings because you indicate,

and I quote, " institutions would use the ratings as a Federal en
dorsement in advertising," close quote.

>

161

That seems to me to be a much more equitable way to deal with
the situation and make it possible then to have a seal of approval.

162

I frankly think that safety and soundness in this environment
we're operating should be the overriding criteria in looking at
these provisions.

a

Senator SASSER . Mr. Chairman .

The CHAIRMAN . I beg your pardon.

SAFETY AND SOUNDNESS OF INSTITUTIONS

Mr. CLARKE . To get to your question of what would have the
least impact on the safety and soundness of institutions, that would

163

the disclosure provisions already incorporated in the Senate bill
with respect to home equity lending and truth -in -savings. We prob
ably would also not have any particular objection to requiring that
banks provide some kind of notice of branch closings. We've al

ready encouraged banks to do that voluntarily. But I think it ought
to stop there. That should be a business decision made by the fi
nancial institution itself.

164

think the situation in Milwaukee is about the same and it's likely
to be about the same elsewhere.

1

165

Mr. CLARKE. Mr. Chairman , we are against disclosure, too , let me

explain .

166

that triumvirate - the part charged with the responsibility of as
sessing the extent to which banks are meeting the credit needs of
their community .

STATEMENT OF KENT CARRUTHERS, PRESIDENT, THE CITIZENS

CREDIT UNIONS EXEMPTED

We are dismayed that the Senate bill exempted credit unions

from specific parts of this bill . Community bankers strongly sup
port the technical amendments to the Expedited Funds Availability
Act, although we are adamantly opposed to the provisions in the

House bill that give special treatment to credit union payable
through drafts.

167

utilities which should provide congressionally mandated banking
services at set prices.

SOME SERIOUS DEFICIENCIES

First, it does not establish a true account relationship between
the bank and the customer. An account relationship, even a life
line or basic account, provides the bank and the consumer with the
opportunity to develop a banking relationship.

168

Title IV imposes stringent new burdens on banks and bank hold
ing companies but does not touch the operations of nonbank banks,
securities firms, insurance companies and other companies which
also provide financial services.

Kent
is
name
y
m,Committee
the
of
members
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Chairman
Mr.
m
,iIaPresident
Clovis
Bank
Citizens
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of
.n
Carruthers
ew
mnd
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,Clovis
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appearing
this
of
behalf
on
morning
.The
America
of
Association
Bankers
Independent
the
the
is
IBAA
only
that
association
trade
national
the
represents
exclusively
TESTIMONY

.
banks
community
independent
of
interests
Iappreciate
concerns
serious
present
to
opportunity
the
Title
in
provisions
consumer
various
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about
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community
ounded
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with
me
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My
-r
. ell
H.R.5094
of
the
over
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ank
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Comptroller
the
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for
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years

CARRUTHERS
KENT

OF
PRESIDENT

consumer
the
addressing
Before
Ir.
to
like
'd
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you
thank
,for
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in
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BANK
CITIZENS
THE
CLOVIS
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structure
company

MEXICO
,NEW
CLOVIS

continue
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nonbank
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THE
OF
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these
handle

AMERICA
OF
ASSOCIATION
BANKERS
INDEPENDENT

169

ON

-CONSUMER
5094
H.R.
OF
PROVISIONS
PROTECTION

TITLE
IV

.
requirements
f
, irst
Chairman
Mr.
like
Iw
ould
the
on
focus
to
consumer

provisions
the
by
supported
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support
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-peassed
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.House
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equity
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exempted
.Credit
bill
this
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equity
home
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very
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no
deserve

THE
BEFORE

,HOUSING
BANKING
ON
COMMITTEE
AFFAIRS
URBAN
AND
STATES
UNITED
SENATE

interest
exception
.As
,credit
consumers
entitled
are
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union

customers
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same
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to
union
credit
should
able
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would
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the
receive
to
abank
from
?circumstances
S988
THURSDAY
,1
8
EPTEMBER

,
amendments
technical
the
support
strongly
bankers
Community
BUILDING
SENATE
DIRKSEN
538
ROOM
OFFICE

WASHINGTON
,D.C.

,t
bills
House
and
Senate
the
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o
included
Funds
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ntly
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availablity
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-3

-2

,if
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must
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170

of
to
reason
sufficient
than
more
be
should
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.A
account
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close

.
soundness
and
safety
of
tenets
basic

,the
Chairman
Mr.
IV
Title
in
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check
government
still
h
proposals
earlier
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a,iis
has
towever
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-5

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urthermore
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ust
There
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ank
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igh
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banks
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IV
Title

million
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assets
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on
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result
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nder
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Mortgage
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Act
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by
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away
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onerous
CRA
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and
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primarily
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CRA
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expand
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bill
House
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CRA
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activities
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ank's
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example
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to
apply
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application
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engage
to
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ank
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ven
data
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community
bank's
in
credit
of
granting
the
with
do
to
nothing
expansions
bank
most
to
costs
significant
add
will
requirements
Such

171

million
or
assets
in
$2two
under
5
exemptions
banks
for
specific
are
companies
holding
$50heir
under
banks
agricultural
:(1)t
million
applications
nonbanking
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exempt
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Act
Company
Holding
Bank
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under
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();new
nd
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banks
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these
requirements
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community
.level
banks
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promoted
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igher
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We

banking
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Finally
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to
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and
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at
come
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CRA
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concerned
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soundness
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for
calls
bill
House
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of
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the
agencies
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regulatory
bank
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of
reorganization
massive
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consumer
for
examiners
exclusively
to
new
numbers
large
of
have
agencies
the
of
resources
human
The
regulations
.
compliance
and
troubled
failed
of
numbers
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recruit
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banks
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bill
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ublic
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CRA
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to
negatively
used
public
general
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for
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hold
the
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to
or
institution
of
and
safety
impair
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demands
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hostage
institution
PRA
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requires
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of
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posted
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,n
the
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time
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during
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bank
file
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statement
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see
to
request
existing
of
advantage
taking
not
are
Consumers
.
received
been

-6

demanding
represent
are
consumers
they
say
that
groups
yet
information
a#3)( more
.ttachment
not
will
year
this
passed
legislation
any
that
hope
we
While

urge
consideration
your
CRA
,winclude
changes
strongly
e
onerous
these
banks
.
agricultural
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small
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levels
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built
adjustment
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inflation
type
annual
of
suggest
some
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Also
.into
such
provision
any

the
to
objections
serious
have
we
,In
Chairman
Mr.
conclusion
availability
.you
IV
funds
Title
A
,t
know
he
s
of
provisions
pages
of
banks
650
over
have
and
week
last
effect
took
just
legislation
with
.to
comply
add
would
IV
Title
regulations
consumer
new
six
that
to
Add
.protection
regulations
hundreds
more
pages
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and
laws
and
p
a
credit
ossible
regulators
for
powers
enforcement
enhanced
the

with
new
community
swamped
be
will
banks
and
bill
disclosure
card
regulations
.

deposit
and
banks
the
serve
nature
,c
ommunity
very
their
By
Their
directly
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success
.credit
communities
their
of
needs

towns
.of
I rge
home
their
u
-b
well
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health
dependent
oneing
as
banks
community
of
role
unique
the
mind
in
keep
to
you
.
issues
these
consider

172

173

ATTACH MENT # 1

AROMA MAI
THE CITIZENS BANK OF CLOVIS

THE CITIZENS BANK OF CLOVIS

SERVICE CHARGE AND FEE SCHEDULE

REGULAR CHECKING ACCOUNT -PERSONAL.

Average Daily Balance

ECONO CHECKING -PERSONAL

A monthly fee of $ 2.00, for the first 12 checks; 50 € for each additional check written during cycle. No balance requirement.
Availability of funds is determined by origin of deposited item ( s) . Current availability schedule and bank poliey will
govern . See bank for details .
NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNT " NOW ACCOUNT "
Personal ( Non -Business )

Minimum required balance: $ 500.00
$ 500.00 and over

Business

Interest earned on the average daily collected balance, payable on cycle date .
Regardless of balance, a service charge of 1sc per check , 250 each deposit and $ 3.00 each item charged back . If statement
balance falls below $ 3,000.00 at any time during the monthly cycle, preceeding charges plus maintenance fee of $ 10.00 .
MMDA - MONEY MARKET DEPOSIT ACCOUNT

Interest can change every Tuesday, Compounded daily , Interesi earned on the average daily collected balance , payable
on cycle date. Three withdrawals and three dratis allowed per month . Should withdrawals exceed the maximum number ,
the bank may either close account or take away accounts ' transfer and draft capacities. Unlimited transactions at bank .

Should halance fall to below $ 2.500 but above $ .00 , interest will be paid at " NOW ACCOUNT " rate for cycle period.
Below $ 900 at any time during cycle period , account will be charged $ 6.00 maintenance fee plus 20c per check .
SAVINGS ACCOUNT

Interest compounded daily, minimum balance to open is 5100.00 . Interest paid if account carns 40€ or more per month .
$ 1.00 per month charge on accounts with less than $ 100.00 . Two withdrawals per monthly cycle period, withdrawals in
excess of two will be charged $ 1.00 cach .
Dormant Account Status: A demnand deposit account will become dormant after 180 days without customer generated ac

finity. A $ 10.00 charge will he assessed when account goes dormant plus a $ 5.00 per month fee regardless ot balance.
A Time Account ( savings ) becomes dormant afier three years of no customer generated activity . A $ 10.00 charge will be
assessed when account goes dormant plus a $ 1.00 per month lee regardless of balance . All dormant accounts turned over
to the state alier statuatory time period .

174

ATTACHMENT # 2

$ 2.00 Fee For Cashing
Non - customer Check .

Effective 11/1/86

Note :

sikinis

that these are light cardboard signs posted at the teller station .

175

ATTACHMENT # 3
KENT CARRUTHERS
PRESIDENT

mo
P n.
The Citizens Bank of Clovis
COMMUNITY REINVESTMENT-ACT NOTICE

NOTICE :

The Federal Community Reinvestment Act ( CRA) requires

the Federal Deposit Insurance Corporation to evaluate our perfor

mance in helping to meet the credit needs of this community , and
to take this evaluation into account when the Federal Deposit

Insurance Corporation decides on certain applications submitted
by us .

Your involvement is encouraged .
YOU SHOULD KNOW THAT

You may obtain our current CRA Statement for this

community in this office .

( Current CRA Statements for

other communities served by us are available at our
head office , located at 5th and Pile Streets , Clovis ,
New Mexico) .

You may send signed , written comments about our CRA
Statement ( s ) or our performance in helping to meet
community credit needs to the office of the President ,

The Citizens Bank of Clovis , P. O. Box 1629 , Clovis ,
New Mexico 88102-1629 and to community Reinvestment
officer of the Federal Deposit Insurance Corporation ,
1910 Pacific Avenue , Suite 1900 , Dallas , Texas 75201 .
Your letter together with any responses by us , may be
made public .

You may look at a file of all signed , written comments
received by us within the past two years , any respon
ses we have made to the comments , and all CRA State
ments in effect during the past two years at our

office located at 5th and Pile Streets , clovis , New
Mexico .
( You may also look at the file about this
community at The Citizens Bank of Clovis , Main Office ,
5th and Pile Streets , Clovis , New Mexico ) .
You may ask to look at any comments received by the

Federal Deposit Insurance Corporation's regional
office at 1910 Pacific Avenue , Suite 1900 , Dallas ,
Texas 75201 .

You may also request from the Federal Deposit Insur

ance Corporation , Bank Supervision Division , Office of
Consumer and Compliance Programs , 550 17th Street
N.W. , Washington , D.C. 20429 , an announcement of ap
plications coveredby the CRA filed with the Federal
Deposit Insurance Corporation .

BOX

1 6 2 9

CLOVIS .

NEW

MEXICO

8 8 1 0 1

PHONE

5051769-19 11

176

ATACHMENT # 3
KENT CARRUTHERS
PRESIDENT

The
AVISO

Citizens

Bank

of

Clovis

SOBRE LA LEY DE REINVERSION EN LA COMUNIDAD

La Ley Federal de la Reinversion de la Comunidad ( " The
Federal Community Reinvestment Act : ( CRA ) requiere que la Corpor
acion ( FDIC ) ) evalue nuestras actuaciones encaminadas a ayudar a
satisfacer las necesidades de credito de esta comunidad , y que

considere esta evaluacion cuando el FDIC vaya a decidir sobre
ciertas solicitudes nuestras .

Su envolvimiento se favorece .

" Usted debe saber que :

-Usted puede obtener nuestra Declaracion de CRA para
esta

-Usted puede enviarnos sus comentarios escritos firma
dos acerca de nuestras Declaraciones sobre el CRA , O
sobre nuestras actuaciones para ayudar a satisfacer
las necesidades de credito de la comunidad a ( Presi
dente de el Banco de Citizens de Clovis , 5th and Pile

Street , Clovis , New Mexico . )

ya ( ofical de La Rein

version De La Communidad , corporacion

Federal

de

Seguro De Deposito , 1910 Pacific Avenue , Suite 1900 ,
Dallas , Texas 75201 .
Su carta , asi como cualquier

respuesta nuestra podra hacerse publica .
-Usted puede indagar en un expediente sobre todos los
comentarios firmados recibidos por nosotros durante

los pasados dos anos , cualquier respuesta que hayamos
hecho a los comentarios y todas las Declaraciones de

CRA en efecto durante los ultimos dos anos en nuestra
oficina principal localizada en ( 5th and Pile Street ,
Clovis , New Mexico ) .
( Usted tambien puede ver el
expediente sobre esta comunidad en ( oficial De La
Reinversion De La Comminidad , El Banco de Citizens de
Clovis , 5th and Pile Street , Clovis , New Mexico ) .
-Usted tambien puede ver cualquier comentario recibido

por la Oficina Regional de FDIC en la oficina de 1910
Pacific Avenue , Suite 1900 , Dallas , Texas 75201 .

-Usted tambien puede requerir de la Corporacion
Federal de Seguro de Deposito ( FDIC ) , 550 17th Street ,
N.W. , Washington , D.C. 20429 caulquier anuncio de
solicitud cubierto por el CRA ,

BOX

1 6 2 9

CLOVIS .

NEW

MEXICO

radicadas en el FDIC .

8 8 1 0 1

PHONE

5 05 / 769.19 1 1

177

The CHAIRMAN . Thank you very much, Mr. Carruthers.

STATEMENT OF J. BLAIR CULPEPPER, PRESIDENT AND CEO,

a

178
PROBLEMS WITH THE CHECK CASHING PROVISIONS

We also have practical problems with the Government check
cashing portion of the basic services bill.

2

Financial
Services
Access_te
frequently
presents
H.R.5094
is
what
in
proposals
two

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banking
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ifeline
asic
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benefit
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179

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Act
Modernization
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March
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H.R.
IV
Title
proposals

181

proposition
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-7

-8

Your
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e
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5094
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selection
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Community
Benefits
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The
bill
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, ncluding
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nd
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money
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which
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soundness
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management
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and
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182

participants
and
duties
the
outlined
suggest
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interference
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c
, ompliance
and
enforcement
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.responsibilities
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not
is
inconceivable
that
diversion
the
agency
of
resources
and
attention
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to
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Community
such
Review
Boards
could
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assignment
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the
of
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and
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the
and
soundness
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merit
public's
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elaborate
The
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companies
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need
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holding
companies
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ithey
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er
ay
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t
hey
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than
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-9

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184

The CHAIRMAN. Thank you , Mr. Culpepper.

STATEMENT OF JOHN M. KOLESAR, PRESIDENT AND CEO,

CUSTOMERS WOULD BE THE LOSERS

Instead of complementing the Senate's procompetitive reforms,
title IV promotes a scheme of punitive interference in our joint ef
forts to serve our customers and your constituents. Except for a
small subset of the population, customers would be the losers, not
the beneficiaries of title IV's formula for credit allocation and sub

sidized entitlements .

1
1

185

CBA finds title IV's CRA provisions in particular to be fatally
flawed . Notwithstanding this view , we do suggest, as Senator Bond
has requested, certain refinements to the existing Community Re
investment Act and we will offer additional ideas that may merit
the committee's consideration .

RECOMMENDATIONS FOR IMPROVING CRA

Let me move, Mr. Chairman , to the specific recommendations
that we might make for improvements in the existing Community
Reinvestment Act.

186

We would support public notification of branch closings and we

would encourage a scheme of CRA credit, if you will, for voluntary
basic banking and government check cashing services.

Thank you .

[ The complete prepared statement of John M. Kolesar follows:]

deen
be
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187

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to
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concerns

188

low
-income
based
neighborhoods
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ton
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29

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205

The CHAIRMAN . Thank you very much , Mr. Kolesar.

STATEMENT OF THOMAS P. RIDEOUT, VICE CHAIRMAN , FIRST

PROVISIONS OF TITLE IV ARE UNACCEPTABLE

While the ABA supports the purposes of the Community Rein
vestment Act, we must oppose the CRA provisions in title IV of
H.R. 5094. They are unworkable and unacceptable for at least five
principal reasons:

206

loans to " meet"

low - income, small- farms, and small-business

needs — all of this without considering safety and soundness. The
proposed scheme would lead to a permanent system of credit allo
cation .

Contents
of
Table

Page
STATEMENT
PREPARED

1

Introduction

I.

of
Statement

"A
Benefit
CBSubtitles
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A
mendments
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.
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2

Needs
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Rideout
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9
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Chairman
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11

14
15

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Banking
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15

Elect
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17

Association
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19

Loan
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20

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21
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VII
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Hnd
Banking
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,aCommittee
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22
.
Amendments
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Opportunity
Credit
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H
.Subtitle
VIII

States
United
Senate

APPENDICES

1
8, 988
September

1.

Provisions
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Credit

207

the
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8,1988
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12

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APPLICATIONS
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16

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216

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1
APPENDIX

CONTENTS
OF
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OF
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Page

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255

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256

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-8

257

States
United
The
Department
Agriculture
of
examining
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proposals
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distribution
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ulnerability

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OR
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checks
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258

York
City
:New

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-10

-11

GOVERNMENT
OF
CASHING
WITH
DEALING
LAWS
ENACTED
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STATES
FOLLOWING
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:
CHECKS

Connecticut
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3
APPENDIX

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NOTICE
AND
ANALYSIS
CLOSING
BRANCH
REQUIREMENTS

established
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.
State
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5094
H.R.

Massachusetts
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1983
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oRequires
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and
65
old
years
.18

259

oRtate
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Association
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-12

same
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THRIFT
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D
SUBTITLE
AND
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1988
OF
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future
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Analysis

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260

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-2

SAVINGS
IN
T
ERUTH
SUBTITLE

Analysis
Summary
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Background
to
Institutions
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Savings
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Subtitle
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4
APPENDIX
.
subtitle

advertisements
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SUBTITLE
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SAVINGS
IN
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5094
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261

comprehensive
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of
encourage
or
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world
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them
affect
not
will
.ofliminating
any

7
APPENDIX

H
SUBTITLE
OF
ANALYSIS
AMENDMENTS
ACT
OPPORTUNITY
CREDIT
EQUAL

5094
H.R.

prejudice
such
perceptions
.of

269

complaints
specific
the
of
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and
women
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toegardless
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articularly

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usiness
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urthermore
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•2

270

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articularly
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271

securing
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NAWBO's
at
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concerned
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The
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.application
approval
credit
of

272

273

The CHAIRMAN . Thank you very much, Mr. Rideout.

STATEMENT OF DAVID J. SULLIVAN , PRESIDENT AND CEO, ME

274

and counterproductive. We maintain that these provisions of title
IV , as currently drafted , are unworkable and impractical.

1
.

1

ness .

The House committee has justified the stronger CRA require
ments with the following argument: a concern that when banks get

greater securities powers, they will concentrate more on securities
activities and less on meeting consumer needs.

LIFELINE BANKING SHOULD BE ADDRESSED AT THE STATE LEVEL

The national council also believes that Lifeline banking issues

are most appropriately and effectively addressed at the State level.
In fact, several States, including Massachusetts, New York , Ohio,

and my own State, have already enacted laws addressing govern
ment check -cashing regulations.

INTRODUCTION

Chairman
mMr.
Committee
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PROVISIONS
5094
H.R.
OF
IV
TITLE
IN
PROTECTION
CONSUMER

National
Council
The
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10:00
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Septemb
er

turn
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,Dirksen
538
Room
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Senate

275

will
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Congress
of
concerns
legitimate
the

-3

-2

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276

Bank
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-5

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IV
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277

enact
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-7
-6

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testimony
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,CAlan
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Community
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:
that

278

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-9

during
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279

ind
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280

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-13
-12

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281

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-15

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282

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-17

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- 88 - 10

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95
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284

banks
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5094
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present
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IV
. ut

285

The CHAIRMAN . Well, thank you very much, Mr. Sullivan .

286

Mr. KOLESAR. That's correct, Mr. Chairman .

287

The CHAIRMAN . Mr. Carruthers, you say on page 3 of your testi

mony that the IBAA believes that the Government check -cashing
provisions in title IV of the House bill need further improvement.
SAME DAY AVAILABILITY OF FUNDS

Would the IBAA support the provision if it provided for the
direct deposit of government checks and if the customer could have

the funds on a same-day availability for withdrawal?

288

an oil company. That list has been narrowed down to, I believe it

is, six secondary identification forms which are satisfactory, and we
expect that will begin

a

DISCLOSURE OF CRA RATINGS

Mr. SULLIVAN . Well, speaking for our own institution , disclosure
would not be a problem because I think we do an exceptionally fine
job.

289

Mr. SULLIVAN . As a basic principle after the examination has
been conducted and if disclosure - if the Congress said we had to do

it, of course we would do it. I don't see that there would be any
great benefit from it. Nor do I see that there is any great detri
ment.

a

290

ought to be a matter of public policy ? Do you feel comfortable with
it in terms of it representing individual financial institutions or
sectors ?
COMMUNITY INVESTMENT

Mr. RIDEOUT. Senator Riegle, I would be delighted to begin the
responses by saying first of all that the American Bankers Associa

tion and our member institutions very strongly support the intent
and purposes and the premises of CRA as it was passed in 1977 .

291

of organizations that also suck deposits out of a community; specifi
cally, insurance companies and mutual funds.

292

But there is enough data that has been collected and continues
to surface

and I know we can talk about the methodologies as to

how the studies are done - but there certainly seems to be some
amount of evidence that would indicate that black citizens seeking

loans of various kinds have a tougher time, especially in urban
areas, getting access to credit or mortgages than either white

people do or if they were living in other suburban areas.

LOANS TO BLACK CITIZENS

Mr. RIDEOUT. I would be very happy to address that with particu

lar reference to the city of Atlanta, GA, where our bank has a
banking operation .

293

tors, say, or your minority depositors who were whatever percent

of your total business and in fact proportional to your otherdeposi
tors the loan ratios, whether for new mortgages or for home im
provement loans, there was substantial variance between these, if
you saw that cropping up in your numbers, would that cause you to

look at that issue and say to yourself, you know , maybe there's a
problem , maybe they're not finding us, we're not finding them ,
maybe there are some blockages in the system ?

a

294

Now, you can see that there is reason for blacks to be concerned
about this and for feeling that there is real discrimination in
volved .

295

tell you that, from my part just looking back in time , I don't aim

this at you, but, you know , we've invested an awful lot of money
through the banking system in foreign countries-a ton of money
that isn't being paid back .

>

296

Senator RIEGLE . And I don't mean to aim just these comments at
you. Please understand that.

297

I'm setting that up to pose a different kind of a concept for you .
It seems to me one great strength you have as financial institutions

is to be able to go in and make risk appraisals, to be able to assess
the wisdom of an investment, the wisdom of a loan, whether it's to
an individual, to a small company. We're talking about inner city

or we're talking about minority borrowers or lending applicants, or
what have you .

a

298

could maybe do a job that goes way beyond what we presently are
doing, or feel that we can do.

299

We lost $ 3 million on that $ 30 million; by the time the foreclo

sures were taken care of, the defaults , that's what — and we passed
that money along at 50 basis points. We didn't make a nickel on it.

now .

Mr. SULLIVAN . Well, thank you, sir. ( Laughter.]

I wish Mr. Seidman was here to hear that. [ Laughter.]
Mr. RIDEOUT . Senator , may I-

300

terms of good beneficial community reinvestment activity per
dollar spent.

1

301

his vantage point, that the CRA loans had turned out to be gener
ally pretty good loans.

PROVISIONS AIMED AT STRENGTHENING THE

FRIDAY, SEPTEMBER 9, 1988

U.S. SENATE ,

COMMITTEE ON BANKING , HOUSING , AND URBAN AFFAIRS,

OPENING STATEMENT OF CHAIRMAN PROXMIRE

The CHAIRMAN. The committee will come to order.

( 303)

304

checks, truth - in -savings, branch closings, and even Lifeline banking
services.

OPENING STATEMENT OF SENATOR GARN

Senator GARN . Thank you, Mr. Chairman .

Thank you .

305

The CHAIRMAN . Thank you , Senator Garn .
Senator D'Amato ?

Senator D'AMATO. Thank you, Mr. Chairman .

OPENING STATEMENT OF SENATOR ALFONSE D'AMATO

Senator D'AMATO. Mr. Chairman , as you know I consider the
Senate banking bill grievously flawed in its failure to properly bal
ance between the interests of the banking industry and the safety
and soundness of the banks themselves. However, I will not belabor

that point; we have had that debate already.

306

local community. In this sense, CRA is a landmark piece of legisla
tion, and we believe it's time to strengthen it.

STRENGTHENING THE CRA

The first reason was documented fairly well in the hearings

which you held last March , your CRA oversight hearings. The wit
nesses there made a very strong case that generally speaking there
is a lot more that banks could do to serve local community credit
needs. Some banks have done well, others have done very poorly.

But generally, on average , there seems to be a feeling that more
should be done .

#

307

Now , quickly shifting to CRA as we see it and how we would like
to reform it, I think it is useful to view CRA as having three com
ponents. First, there are the assessment factors, which the agencies
laid out in their regulations; and we think they did a good job . We

think they followed the intent of Congress.

a

BANK REGULATORS ARE NOT ENFORCING THE LAW

I come here today to implore you to pass title IV of the House
banking bill. The Community Reinvestment Act, which was created
by you , Senator Proxmire, is not working, not as you intended it to

work. The regulators are not enforcing the law as it was written.
The banks are not funneling moneys back into our communities as
the law is supposed to mandate.

308

But banks have run up record profits in just 3 months of this
year alone, they earned $ 10.5 billion . Now, how can anyone tell me

and my people that some of that money could not be channeled
back into our neighborhoods ?

309

intend and have been working with us. And for that, we are grate
ful to them.

STATEMENT OF ALLEN FISHBEIN, GENERAL COUNSEL, CENTER

310

that in the past 3 years they have received more CRA protests
than they received in the first 7 years that the act was in exist
ence. And CRA enforcement by the regulators is clearly inad

equate, as the testimony before the oversight hearings last March
clearly pointed out.

311

to the banking system than it once was, so it is important to

extend the coverage of CRA to nonbanking activities which are per
ceived as being more lucrative to the industry.

I.

INTRODUCTION

OF
TESTIMONY

sBanking
, enior
weeks
next
In
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down
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to
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Brown
Jonathan

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ankwatch

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title
essential
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Senator

Fishbein
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Allen
General
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for

holding
for
Committee
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of
fully
more
to
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these
educate

themselves
consumer
the
protection
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title
the
appreciate
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312

on
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testify
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5094

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,1
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2
-

3
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313

development
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5094
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5
-

billions
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Members
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Chairman
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1977
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For
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ime
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to
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community
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process
.

314

.
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people
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igher
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powers
expanded
seeking

7
-

90-163 0 - 88 - 11

ital ions
vand
ais
evaluat
rating
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ure
disclos
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1977
REINVESTMENT
OF
ACT
COMMUNITY
THE
A
. MENDMENTS
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315

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343

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344

5

345

The CHAIRMAN . Thank you , Mr. Fishbein .

PROPOSAL BY FED

Mr. FISHBEIN . First of all, Mr. Chairman, I think it is an impor

tant step forward. It is important for the Fed to recognize the need
for more access to information about the performance of local
banks.

346

Ms. M. BROWN. But, you see, they are all across the board get

ting above-average ratings, and they're not doing the job anyway.
So, it's like you say, a misnomer.

ESTABLISH A STANDARD

Senator GRAHAM . To follow up on the question that Senator

Proxmire was just asking, would it not be more feasible to establish

347

an absolute standard: “ This is what is expected in order to be in
compliance with your CRA obligations," and then certify either on

a pass-fail basis that you met that standard or that you did not ?

90-163 О

- 88 - 12

-

348

being served . He made the observation that he felt that that third

part of the partnership, the communities, had not been carrying
their appropriate responsibilities, and cited the fact that frequently
examination of the file of a bank by a regulator will be void in
terms of comments by community members or groups as to how

well that bank is serving the community.

349

STATEMENT OF SENATOR DONALD W. RIEGLE , JR .
COMMUNITY AND CONSUMER BENEFITS

IN HOUSE BANKING BILL

SEPTEMBER 9 , 1988

10:00 a.m.

Today , we hear from witnesses whose groups have worked

tirelessly in an effort to make sure that our financial laws are
fair to consumers and to communities and that local community

economic development is encouraged
We are currently conducting our own review of problems that
have been brought to our attention in Detroit so I hesitate to
consider that situation now .

However , we have reviewed the

Atlanta situation , and the statistical allegations are alarming .
In Atlanta it is alleged that :
* Banks return an estimated 9 cents of each dollar deposited

by blacks in home loans to black neighborhoods ; they return
15 cents of each dollar deposited by whites in home loans to
white neighborhoods .

If true , this constitutes a serious

disinvestment problem .

* The largest banking institutions take home loan applications
in offices predominantly in white neighborhoods .

Several

banks have recently closed offices in black areas , yet
opened them in white neighborhoods .
* Two lenders that volunteered rejection data showed they

turned down black applications four times as often as white

applicants .

350

The Committee heard concern yesterday from one thrift lender
that making loans to minorities and low income groups can be

risky

Well , according to the Atlanta study , the bank with the

lowest default rate on real estate loans of any bank its size in

the country is a black - owned institution that lends almost
exclusively to black neighborhoods .
Our witnesses today have championed the need for basic

banking services for all Americans .

When it comes to community

reinvestment , these groups have served as the front line in
highlighting discrimination .

That should be the task of our

regulators .

It is encouraging that a number of the regulators and bankers
that the Committee heard from yesterday embrace the public merits
of community reinvestment goals , and acknowledge that

improvements can be made .

Specifically , there is emerging

agreement that CRA assessments be disclosed and that examinations
be more vigorous , possibly by specialized supervisors .

A renewed

commitment to community reinvestment is important and , Mr.
Chairman , Icommend you for your past and current leadership in
that effort .

351

STATEMENT OF SENATOR JIM SASSER , SENATE BANKING COMMITTEE ,
SEPTEMBER 9 ,

1988

MR . CHAIRMAN , I AM PLEASED THAT WE ARE CONTINUING OUR
HEARINGS ON THE CONSUMER PROVISIONS OF THE HOUSE BANKING BILL .

AS THE TESTIMONY TODAY WILL INDICATE , MANY OF THESE PROVISIONS
ARE WORTHWHILE AND WILL BE OF GREAT BENEFIT TO CONSUMERS .

MOST IMPORTANTLY , MANY OF THESE PROVISIONS CAN BE ENACTED WITHOUT
AFFECTING THE SAFETY AND SOUNDNESS OF THE BANKS .
I THINK IT'S STARTLING HOW MANY FAMILIES IN THIS COUNTRY DO
NOT HAVE ACCESS TO BANKING SERVICES .

PEOPLE ARE PAYING UP TO 6 %

OF THE FACE VALUE OF A GOVERNMENT CHECK TO CASH THAT GOVERNMENT
CHECK AT A CHECK CASHING " EMPORIUM . "

EVEN CUSTOMERS OF BANKS ARE

OFTEN REQUIRED TO HAVE THE BALANCE ON DEPOSIT BEFORE THE BANK

WILL CASH THE CHECK .

.l .

352

OBVIOUSLY , THESE ARE PROHIBITIVE BURDENS FOR LOW INCOME AND
RETIRED PEOPLE .

AND THEY ARE UNNECESSARY .

I DO NOT BELIEVE THAT

REQUIRING BANKS TO OFFER BASIC BANKING SERVICES WILL AFFECT THEIR

SAFETY AND SOUNDNESS .
AND IT'S CLEAR THAT BANKS CAN BE BETTER IN THE AREA OF

COMMUNITY REINVESTMENT .

REDLINING IS STILL A FACTOR IN MANY OF

OUR URBAN NEIGHBORHOODS .

WHETHER WE NEED TO GO AS FAR AS THE

HOUSE BILL DOES ON CRA IS ANOTHER QUESTION ; THERE WE COULD HAVE A
SAFETY AND SOUNDNESS IMPACT .
MR . CHAIRMAN , I THINK THAT MANY OF THESE PROVISIONS SHOULD
BE ENACTED .

INDEED , THEY WOULD ENHANCE THE PROXMIRE BILL , AND

HELP MAKE IT MAJOR STEP FORWARD IN BANK SERVICE TO BUSINESSES ,
CONSUMERS AND COMMUNITIES .

THANK YOU .

353

Senator RIEGLE. Let me also say again how much I appreciate

your leadership in having these particular hearings today and also
the testimony of the witnesses that are here and, more than that,

their commitment to these issues and of their organizations to
these issues .

CONFLICTING REPORTS ON LOAN EXPERIENCES

Yesterday we heard conflicting reports—I don't know whether
you indicated whether you were here yesterday or had the chance

354

to see the testimony that was given yesterday. I assume you are
generally familiar with it — but we had a Connecticut banker who
said he lost money in that kind of a lending activity, and an Ohio
banker at the same time who said his default rate was even lower

on the CRA loans than the bank's overall portfolio .

355

But maybe we ought to be thinking about some kind of a new

hybrid arrangementwhere the Federal Government actually gets
involved on the margin with that increment of risk that may in
fact be there in some situations so that we don't draw the line so

far away from granting credits where there is a higher level of
risk , that in fact we cause a downward spiral within an area. It

seems to me that if an area can't refinance itself, keep itself vi
brant, keep itself strong, that that is almost a certain recipe for
going down the drain .

2
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361

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362
PUBLIC DISCLOSURE COULD HAVE A POSITIVE EFFECT

The CHAIRMAN. Mr. Fishbein , if the CRA ratings were disclosed
publicly, some regulators worry that their examiners would face
new pressures, banks would haggle about low ratings and high rat
ings, and this would ignite public criticism.

363

Freddie Mac has not imposed any restrictions which I believe could adversely
affect lenders in carrying out their CRA responsibilities. To the extent that borrow

ers are told by lenders that their applications have been denied because of increased
secondary market restrictions, I am concerned about this. It may be that Freddie
Mac is more often an excuse than the real reason that a loan may not be made.

a

364

As I said yesterday when this committee invited community
groups, last March , to evaluate the performance of Federal bank

ing agencies' enforcement of the Community Reinvestment Act,

these groups were tough graders. Each of the bank regulators were
given failing grades.

RATING SYSTEM

Mr. BROWN. Senator Heinz, I think you are coming to what I feel
is a latent, but ultimately very important, issue here; and that is, if
it is possible to put in place a public rating system that is well

founded and has enough information to make the ratings legiti
mate

365

Senator HEINZ. By the way, I am assuming — and I didn't state

this at the beginning — that such a rating system would be devel
oped only after consultation with community groups. It isn't done
that way now, but that is the way it ought to be done. I am assum
ing it would be done right.

ance .

366

I think the agencies' reluctance to accept this idea of full disclo
sure of the CRA examination report is not based on any legitimate
public policy. Obviously, in regard to safety and soundness exami

nation reports, there are policy reasons for not disclosing them,
the possibility of triggering a run on the bank . Even for consumer
compliance reports, which may cite violations of consumer credit

laws where there is potential legal liability on the part of the bank ,
there is an arguable case to be made for not disclosing exam re
ports.

367

Mr. FISHBEIN . The point that needs to be stressed is the interre

lationship between reforming the CRA evaluation system and the
rating criteria and the disclosure of evaluations.

STATEMENT OF JUDITH N. BROWN , MEMBER, BOARD OF DIREC

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5

372

The CHAIRMAN . Thank you very much, Ms. Brown .

STATEMENT OF PEGGY MILLER, LEGISLATIVE REPRESENTA
TIVE, CONSUMER FEDERATION OF AMERICA, WASHINGTON, DC

port it .

So we are coming before you because basically the bill that is on
the House side is very well -drafted legislation . The check cashing
provisions dealt with a number of the concerns that were brought
up .

373

refuse any fraudulent check . These sorts of things were all provid
edto address the banks' concerns regarding fraud. A long list.

LIFELINE BANKING

The banking industry claims that Lifeline banking is being pro
vided by 52 percent of the banks. The problem with this statistic is

simply that they are not includingminimum balance, maintenance
fees, and opening requirements. When you include all those things,
many of those accounts they call basic bank accounts can be higher
in cost, according to GAO even , than the current standard account.

374

tee was to move this , that the Senator could leave his long tenure
pointing to a final, very excellent bill.

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376

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380

The CHAIRMAN . Thank you, Ms. Miller.

FRAUD LOSSES

The CHAIRMAN . Let me ask you then, are fraud losses a legiti
mate cost that should be recovered in the fees charged for check
cashing ?
-

381

explicit pricing no longer can banks make huge profits from low
interest savings and no-interest checking accounts.

382

The other point is that check -cashing outlets themselves, the
only statistics I was able to find were in a couple of press articles

back in 1985, that they basically were showing a lower check
bounce rate than banks.

383

When you move into the national level there have been some
enormous problems that have been associated with direct deposit,
as AARP has experienced .

96

1TITLE
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ONSUMER N
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H.R4
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100TH
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RH
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108

107

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110

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RH
5094
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114

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130

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157

158

a30nd
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REVIEW
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159

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RH
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ADMINISTRATIVE
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22

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173

174

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424

EFFECTIVE
427.
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DATE

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REQUIREMENTS
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432.
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22
BANKS
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23

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DON
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446.
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194
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PAYMENT
447.
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19
INTEREST
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AMOUNT
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20

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ADMINISTRATIVE
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EC
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203
204

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15

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15
taking
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17

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18

. 52.
SEC
418
EFFECT
STATE
ON
LAW
19

close

This
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20

20
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21
22
23
24
SEC
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53.
.424
25

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47
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10
DISCLOSURE
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11

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210
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