Inner City Press Community Reinvestment Reporter Archive Number 1: To April 7, 1999

Archive Number 1: Feb.- March, 1999

Gramm on the Web: Your Tax Dollars At Work

The Internet: Citizens Monitoring Government?
Or Government Monitoring Citizens?

Congressional Quarterly of March 24, 1999, reported on the specifics of Senator Phil Gramm’s quest to find anything to back up his already-made accusations that CRA is extortion.

CQ: Gramm “conceded it is difficult to prove such abuses” because “Federal regulators do not keep adequate records of what happens when CRA disputes arise between banks and community groups.” But Gramm added, “Fortunately for us, many of the CRA groups on the Internet do present some of the records of the various kinds of settlements they have gotten. It's part of their advertising.” CQ concluded: Senate Banking Committee investigators “now are checking the claims to see if they can document abuses. Gramm plans to hold hearing on the CRA later this year, and will use any ammunition the staff can gather.”*

Whether this is supposed to, or will, have a chilling effect remains to be seen. What is plainly visible is that Senator Gramm, who blocked financial modernization legislation last fall on the stated ground of CRA abuse, neither had then nor has now evidence of such abuse, and is now using our tax dollars to have his staff surfing the Internet “checking claims to see if they can document abuses.” Your tax dollars at work...

As Gramm searches out community groups' "advertising" (see above), note that Gramm's self-written biography on his Senate web site, Gramm makes much of his vote count in 1984 and 1990, without mentioning the tight race he was given in 1996 by a virtual unknown, school teacher Victor Morales. Gramm highlights two press clips, one in the Atlantic Monthly describing his as a man "who carries his own garment bag." Bringing a new approach to another part of the First Amendment, the separation of church and state, Gramm concludes his bio with the statement that "[t]he Gramms are Episcopalians." Hey, it's "part of his advertising."

Meanwhile, without using any tax dollars (for surfing to the Federal Elections Commission web site, at least), here’s some pertinent (and verified) information: campaign contributions to Phil Gramm from the financial services industry. Advanta, Allstate, American Express, American General; Banc One, BankAmerica, Bankers Trust; Chase, Chubb, Cigna and Citigroup... The list is so long we’ve put it on a separate page: click HERE to view, from Federal Elections Commission records.

A day after his “surf the Net to find CRA abuse” comments quoted in Congressional Quarterly, Gramm, in a speech before the Securities Traders Association in which he claimed that CRA has become "bigger than General Motors", said he will not allow any legislation that curbs securities trading via the Internet. “Freedom scares the government,” Gramm said. “The whole Internet is a frightening prospect to the government. We’re not going to have any bill restricting online trading until... we can take a realistic look at it.”

Phil Gramm has been in the U.S. Senate for fourteen years, and on the government payroll for longer than that, but still attempts to distinguish himself from “the government,” by waving to stock brokers the banner of freedom. Freedom to day trade, and speculate on the currencies of nations falling apart -- but investigate and crack down on the community groups trying to make sure that the global economy and consolidating banks don’t leave their neighborhoods in the dust.

Meanwhile, on your tax dollars, Phil Gramm’s staffers cruise the Internet, look for CRA abuses and claims to investigate. Foolishly, we thought the benefit of the Internet was that citizens could monitor the government -- not the other way around. Developing...

* As reported in the Bulletin Broadfaxing Network’s Frontrunner of 3/24/99.

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March 22, 1999

Washington Roundup: The Disfunctions of Democracy

Phil Gramm’s crusade-without-evidence continues. Senator Gramm has indicated his intent to offer, as a floor amendment on May 3 or 10, his “anti-extortion” proposal, which would criminalize any combination of community development and advocacy. See BNA’s Banking Daily of 3/19/99, quoting Gramm: “I mean, anyone can offer an amendment on the floor, including the chairman."

Meanwhile, Gramm’s spokesperson Christi Harlan, asked by a journalist if Gramm has examples of CRA extortion, responded in the negative, and said, we’re looking for them. Hey, accuse (and filibuster financial modernization legislation) first, and search for evidence later, right?

A question arises: who will demand that Phil Gramm “put up or shut up?” Senate Democrats, one might assume. But that assumption would be incorrect. For example, the Federal Reserve Board’s response to Inner City Press’ Freedom of Information Act request for all communications with the Senate Banking Committee and its members referred to a half dozen inquiries from Senator Gramm’s staff, and a meeting between Gramm and Governor Gramlich -- and a single, perfunctory inquiry by the Democrats, for comment on a chart they are developing about merger applications processing. This passivity has now been raised to the offices of Senators Sarbanes and Schumer (see below).

While the three other federal bank regulatory agencies all explicitly supported the CRA, and opposed Sen. Gramm's various proposals, at the February 24, 1999, Senate Banking Committee hearing, the Fed pointedly remains silent on CRA. Bridge News reports that on March 16, "Fed Governor Gramlich... said he has a neutral opinion of the CRA...". The Fed's position is so strikingly at odds with that of the other regulators (and so strangely similar to the Gramm-encouraged position of the large banks) as to call for further inquiry -- updates forthcoming.

On March 18 in the bowels of the Rayburn Building, Senator Sarbanes told the assembled members of the National Community Reinvestment Coalition that it falls to them to mobilize their constituents, that these are dark times in the Senate. The need for more civic activism is undeniable. But the more active approach by Democrats on the Senate Banking Committee, which would seem to follow from their and the Administration’s public statements, has not been forthcoming.

Republicans Lott and Gramm appear to be circumventing Senator Sarbanes, and negotiating with what Gramm has called the “soft” Democrats: Dodd (D-CT) and Schumer (D-NY). See CongressDaily of 3/18/99, describing Dodd and Schumer as “Democrats in political need of a bill,” and quoting a lobbyist that Gramm, in a meeting “reported he has been working with Banking member Christopher Dodd...”.

Connecticut is poised to see the effects of unfettered bank consolidation, and of inflated CRA ratings, as Fleet and Bank of Boston apply to combine. Even Treasury Secretary Rubin, he of 26 years at Goldman Sachs, has stated that the Citicorp - Travelers combination raises serious questions. See Federal News Service of 3/19/99, quoting Rubin: “the combination of Travelers and Citibank... also raise[s] the very legitimate questions about systemic risk, concentration of power, and the needs of local communities.”

Chuck Schumer, on the other hand, whose constituents include those being increasingly excluded by Citigroup (but targeted by its subprime subsidiary Commercial Credit), has nothing but good things to say about Citigroup, and about Bankers Trust and Deutsche Bank -- which even Al D’Amato might have opposed, or at least demanded hearings on.

A recent visit by constituents to Schumer’s new office in the Hart Senate Building reflected this dysfunction of democracy. The appointment had been made, and confirmed, with Schumer’s “banking person,” Kate Scheeler. The visitors were told to wait, that Ms. Scheeler was on the telephone. After fifteen minutes, a secretary informed the visitors that Ms. Scheeler had been “called away to the Senator,” and that the scheduled meeting would now by with a more junior Schumer staffer.

A young woman led the visitors back to a round table squeezed between two cubicles. I am the legislative correspondent, the woman announced, and became taking notes on a yellow pad. “Globilization.” “D’Amato.” “Insurance redlining.” The aide’s nail polish was of a bright purple. She perked up when reference was made to a growing perception that Schumer is beholden to the financial firms which financed his campaign.

“I rarely tell people this,” the legislative correspondent began, “but during the primary, I worked for Ferraro. We tried to come up with the links between Schumer’s campaign funders and his votes, and all I can tell you, since we checked, is that there are none.” The legislative corespondent had blushed bright red.

Surrealism continued through what remained of meeting. “Perception is important,” the legislative correspondent stated at one point. A recent Federal Reserve Board letter disclosing Senator Gramm’s recent contacts with the Fed was handed to the legislative correspondent; she folded its corner and promised to pass it up the food chain. The meeting was over. “Aren’t you going to take down our names?” one of the visitors asked. “Kate must have them,” the legislative correspondent responded. “What’s your name?” another visitor asked. “Michelle,” was the answer. Just Michelle. Any business cards? “No, we don’t have them yet.” Dysfunctions of democracy...

It should be noted that the visitors referred to above represent dozens of other community groups, in New York City, Rochester, and elsewhere in New York State. One must assume that Schumer’s office might respond differently to, for example, representatives of companies like MBNA -- which is not even based in New York (but which was awarded the “I Love New York” credit card program). Developing...

The surrealism continued. Massachusetts Rep. Ed Markey, meeting with representatives of Boston community groups, rejected out of hand that a law like CRA should be extended to the securities industry. “The SEC’s doing a fine job,” Markey said. Markey also resisted his constituents’ request that he introduce an amendment for data reporting by insurance companies. “You should work on Ed Towns,” Mr. Markey opined -- “he’s black. Or Bobby Rush... he’s an ex-Black Panther, he could introduce it.” These are the perceived chromatics of financial modernization...

In fact, Rep. Rush (D-IL) is planning to introduce legislation to clean up the usurious field of pay day loans. Ed Towns... is somewhat more invisible on the issues. Other groups, seeking recently to meet with Senator Sarbanes, were asked: “Why are you here? You’re preaching to the converted.” The groups were taken aback -- particularly in light of Senator Sarbanes seeming passivity in the face of Gramm’s outreaches to the Fed, and public accusations of extortion by community groups. Oh, the dysfunctions of democracy...

* * * *

Counter-Intelligence: Inner City Press has learned that the Office of Thrift Supervision has received a Freedom of Information Act request, from a private law firm, seeking all documents reflecting the OTS’ discussions with particularly community groups -- by name.

As apparently intended, this has chilled the OTS’ attempts to hear from all sides of the CRA and other consumer protection debates. ICP is in the process of identifying the “real parties in interest” behind this inquiry with the OTS -- among other things, ICP has now submitted its own request to the OTS, for the private law firm's FOIA request, and all documents responsive to it.

Among the documents released to ICP by the Fed on March 17, 1999, was the full text of Gramm’s staffer’s March 2 letter, asking about particular banks and mergers (and “protestors”):

March 2, 1999

Office of the Congressional Liaison
Federal Reserve System
Constitution Avenue and 20th Street
Washington, DC 20551

On behalf of the Chairman, I was writing to request information regarding the Community Reinvestment Act. Please provide information regarding CRA during the applications process as it pertains to the following banks:

1. Wells Fargo (WA) -- 1996

2. U.S. Bancorp (OR) -- 1997

3. First Union (DC) -- 1996

4. Summitt [sic] Bank (NJ) -- 1996

Also, please include the following... any documentation concerning protests (if any were filed) including but not limited to information on the protestor...

Sincerely

Dina A. Ellis
Senate Banking Committee

This sheds further light on Senator Gramm’s interest in these banks / mergers. He is requesting information about the CRA process in Washington State during the Wells Fargo - First Interstate merger; he is requesting information about the CRA process in Oregon during the U.S. Bancorp - First Bank merger (as intuited, below, from the Federal Reserve Board’s Order in this case). His interest in First Union appears focused on the Signet - First Union merger, rather than the First Union-First Fidelity merger, with particular focus on the protests (and protestors) from D.C.. The Fed itself, in internal e-mail to be reproduced soon in this space, has noted that no protests were received on the Summit Bank merger during the time frame referenced in Gramm’s staffer’s letter.

The Bureau of National Affair’s Banking Daily of March 18, 1999, reports:

“‘Sen. Gramm has stated from the beginning that he is going to examine the CRA and all activities surrounding it, and that is what he is doing,’ Christi Harlan, Senate Banking Committee communications director, said. Moreover, ‘I am extraordinarily impressed with the speed with which the Fed responds to FOIA request,’ she said.”

Since Senator Gramm’s requests to the Fed were not made under FOIA, it appears that Ms. Harlan is referring to the Fed’s FOIA response that disclosed Gramm’s March 5, 1999, meeting with Governor Gramlich, along other things. An agency’s compliance with the time frames mandated by FOIA should hardly be surprising (or be said to be “impress[ive]”). What is surprising is a Senator’s staffer, from the podium in a public forum that has been announced in the Federal News Service press wire, unilaterally stating that all comments are “off the record” -- particularly in light of Senator Gramm’s statement, such as that reported in The Hill of March 10, 1999, at 17, that “[t]he intense scrutiny is probably a good thing.”

ICP is appealing the Fed’s withholding of the most revelatory information responsive to ICP’s FOIA request, and will be reporting further on these issues in this space. Other questions to be explored include whether the Senate Democrats have requested (or received) Gramm-like access to the Fed (for example, Gramm’s March 5, 1999, meeting with FRB Governor Gramlich on these issues, which was disclosed in the Fed’s March 16 letter to ICP, but documents concerning which have NOT be disclosed). Developing...

* * * *

March 17, 1999

The Federal Reserve Board today made public, under the Freedom of Information Act (FOIA), some of its contacts with Senate Banking Committee Chairman Phil Gramm (R-TX), who is engaged in a campaign against the Community Reinvestment Act, in connection with financial modernization legislation and otherwise.

The Fed has disclosed, among other things, a March 5, 1999, meeting between Governor Gramlich and Senator Gramm and repeated letters and telephone calls requesting information, from Gramm staffer Dina Ellis, including a letter that sheds light on the Fed merger cases in which Sen. Gramm may attempt to prove the existence of the “extortion” he has been alleging for six months: Wells Fargo (1996), U.S. Bancorp (1997), Summit Bank (1996), and First Union. The Fed's Order on each of these applications is analyzed below. The Fed is also seeking to withhold information related to its consideration of Gramm’s proposed amendments, and “39 pages of information, consisting of e-mail messages and draft memoranda regarding an oral request from Senator Gramm’s office.” ICP will be seeking those documents, in the first instance through a FOIA appeal.

In a letter, dated March 16, 1999, responding to Inner City Press’ FOIA request of February 22, 1999, Federal Reserve Board Secretary Jennifer Johnson states:

“The Board received several letters and telephone calls from the Senate Banking Committee requesting information concerning CRA. On January 25, 1999, Board staff received a letter from Ms. Dina Ellis, Majority Counsel for the Senate Banking Committee, requesting CRA-related information. On February 18, 1999, Board staff received another letter from Ms. Ellis requesting additional information related to CRA. In response to those letters, staff sent Ms. Ellis the following information: a list of protested applications in 1998, processing statistics for applications from 1989 through 1998, and the CRA Public Evaluations (PE’s) that staff relied on in the 1998 applications. Copies of the letters and the responsive information, except for copies of the PE’s, will be provided to you....

"Contemporaneous with those letters, Board staff received a telephone call from Ms. Patience Singleton of Senator Paul Sarbanes’s staff, requesting similar information. In response to Ms. Singleton’s request, staff sent the following information: a list of protested applications for 1978 through 1998, application processing statistics for 1989 through 1998, and a chart showing the number of public meetings on applications from 1990 through 1998. Copies of this information will be provided to you.

"On February 8, 1998, the Board’s staff received a facsimile from Ms. Singleton requesting comments on draft CRA protest data that had been compiled by staff of the Senate Banking Committee from information received from the banking regulators. Staff responded to this request by telephone. A copy of the facsimile will be provided to you.

"In response to a telephone call from Ms. Ellis requesting additional information... staff provided Ms. Ellis with various Community Affairs (CA) letters, copies of which will be provided to you.

"On February 16, the Board received a letter dated February 12, 1999, from Senator Phil Gramm requesting comments on proposed amendments to the CRA, which we will provide to you. The Board has not responded to the letter. We have, however, identified information responsive to your request that relates to the letter. This information, consisting of 16 pages, will be withheld in full under exemption 5 of FOIA, 5 U.S.C. �552(b)(5), because it consists entirely of staff opinions, recommendations, and analyses that would not be available by law to a party other than an agency in litigation with the agency.

"On March 2, 1999, staff received another letter from Ms. Ellis requesting information regarding CRA issues for applications filed by the following banks: Wells Fargo (1996), U.S. Bancorp (1997), First Union (1996), and Summit Bank (1996). This letter will be provided to you. As of today, no response has been provided to the letter.

"Other responsive documents that will be provided to you include copies of papers provided in a meeting between Senator Gramm, Governor Gramlich, and Board staff on March 5, 1999... [and] copies of e-mail messages among Board staff that discuss the correspondence with the Senate Banking Committee and its staff. Some of the information, including an entire one-page e-mail message, has been withheld under exemption 5... An additional 39 pages of information, consisting of e-mail messages and draft memoranda regarding an oral request from Senator Gramm’s office, have been withheld in their entirety under exemption 5.

"Your request for information, therefore, is partially granted and partially denied for the reason stated above... [T]he documents that are being made available to you under this authorization can be picked up at the Board’s FOI Office tomorrow.”

There is much to be analyzed in the Federal Reserve’s above-quoted statement. Most concretely, it would appear that Senator Gramm has fastened on four particular bank merger applications to attempt to document his “CRA-as-extortion” charges.

Wells Fargo (1996) appears to refer to the merger that year between First Interstate Bancorp and Wells Fargo, the FRB’s approval of which has been published at 82 Federal Reserve Bulletin 445 (May, 1996). That FRB Order states:

Approximately 135 commenters supported the proposal or commented favorably about the CRA performance record of Wells Fargo. n20 More than 600 commenters either opposed the proposal, requested that the Board approve the merger subject to conditions suggested by the commenter, or expressed concerns about the CRA performance record of Wells Fargo or First Interstate. n21 Commenters presented information on a number of aspects of the CRA performance records of the banks involved, including the following: n22

n20 The commenters included: (1) The Greenlining Institute, San Francisco, California; (2) National Community Reinvestment Network, Boston, Massachusetts; (3) the Asian Business Association Incorporated, San Francisco, California; (4) the Phoenix Urban League, Phoenix, Arizona; (5) Los Angeles Community Reinvestment Center, Los Angeles, California; (6) American GI Forum of California, Santa Maria, California; (7) the Black Business Association of Southern California, Los Angeles, California; and (8) the California Hispanic Chamber of Commerce, San Francisco, California.

n21 The commenters included: (1) California Reinvestment Committee, San Francisco, California; (2) Association of Community Organizations for Reform Now, Washington, D.C.; (3) Black State Employees Association of Texas, Inc., Dallas, Texas; (4) Washington Reinvestment Alliance, Seattle, Washington; (5) Nevada Fair Housing Center, Inc., Las Vegas, Nevada; (6) Sacramento Housing & Redevelopment Agency, Sacramento, California; (7) National Association for the Advancement of Colored People, Los Angeles, California; (8) Small Business Finance Corp, San Diego, California; (9) Communities for Accountable Reinvestment, Los Angeles, California; (10) National Community Reinvestment Coalition, Washington, D.C.; (11) East Bay Housing Organizations, Oakland, California; (12) Coalition for Women's Economic Development, Los Angeles, California; (13) members of the U.S. House of Representatives; (14) several members of California's Senate and General Assembly; and (15) officials from several local communities, including mayors, members of city councils, and representatives of local government agencies.

n22 Other issues raised by commenters commending or criticizing the CRA performance record of the institutions involved or discussing the effect of the proposal on the convenience and needs factor also have been carefully considered by the Board. Many of these comments are addressed throughout this order.

U.S. Bancorp (1997) appears to refer to the merger that year between First Bank Systems and U.S. Bancorp, the FRB’s approval of which has been published at 83 Federal Reserve Bulletin 689 (August, 1997). That FRB Order, at footnote 26, states:

n26 During the processing of the applications, the Community Reinvestment Coalition of Oregon ("CRCO") entered into a private agreement with First Bank System that addressed CRA-related issues raised by CRCO and a number of other commenters that concurred in CRCO's comments. Based on this agreement, CRCO supports the proposal. First Bank System also has agreed to designate a senior officer in Portland, Oregon, with the responsibility and the authority to resolve consumer complaints from Oregon residents. In this light, the Oregon Division of Finance and Corporate Securities states that it has no objection to the proposal.

Summit Bank (1996) appears to refer to the merger that year between UJB and Summit, the FRB’s approval of which has been published at 82 Federal Reserve Bulletin 345 (April, 1996). That FRB Order refers to only one protest received, “from an attorney.... based on allegations contained in several lawsuits filed by Protestant against UJB Bank, UJB Financial, and its wholly owned subsidiary Trico Mortgage Company, Inc.

It is unclear to which merger application “First Union (1996)” refers -- in that year, the FRB approved First Union to acquire two relatively small savings banks (Society First and Home Financial). It would appear (following the logic above) that this refers to First Union’s much larger acquisition, in 1995, of First Fidelity, the FRB’s approval of which has been published at 81 Federal Reserve Bulletin 1143 (December, 1995). That FRB Order states:

The Board has received comments supporting and opposing this proposal. Commenters favoring the acquisition included the Urban League, Inc.; the Local Initiatives Support Corporation; the Nashville Minority Business Center; the Clarksville-Montgomery County (Tennessee) Regional Planning Commission; the Duval County (Florida) Housing Finance Authority; the City of Greenville, South Carolina; and the Northwest Corridor Community Development Corporation of Charlotte, Noah Carolina. These commenters, who are primarily involved in affordable housing initiatives, commended First Union's assistance in this area, which included start-up funds, direct loans, and lending programs for minorities and low- and moderate-income individuals. First Union was also commended for providing leadership by encouraging bank personnel with financial expertise to assist in addressing housing-related and credit needs of its entire community, including low- and moderate-income neighborhoods.

Other commenters ("Protestants") criticized the CRA performance records of First Union and First Fidelity in helping to meet the credit needs of low- and moderateincome neighborhoods and communities with predominately minority populations. These Protestants include: the Charlotte Organizing Project, Charlotte, North Carolina; Community Reinvestment Association of North Carolina, Raleigh, North Carolina; Inner City Press/ Community on the Move, Bronx, New York; Community Reinvestment Alliance, Philadelphia, Pennsylvania; United Congregations of Chester County, Coatesville, Pennsylvania; Regional Council of Neighborhood Organizations, Philadelphia, Pennsylvania; Neighborhood Assistance Corporation of America, Boston, Massachusetts; and ACORN, Washington, D.C

The application of Senator Gramm’s proposed “anti-extortion” language (which the Federal Reserve’s March 16, 1999, letter implies that the Fed has not responded to) to the facts in each of the above FRB merger cases -- would be complex. There is much else to analyze in the FRB’s March 16, 1999, letter -- an analysis will be published in this space, as soon as practicable. ICP will also be appealing, under FOIA, the Fed’s various withholding of documents, including documents related to the Fed’s response to Senator Gramm’s inquiries.

ICP will be obtaining the referenced documents from the Federal Reserve Board, and will publish and analyze them in this space as soon as practicable. In the interim, for or with more information, please contact us. ...

March 3, 1999, Update

On March 1, ICP reported that it been informed, “by knowledgeable ‘inside the Beltway’ (make that, ‘inside the Capitol’) sources, that the CRA officer of Chase Manhattan Bank, Carol Parry, is actively promoting and supporting the 'safe harbor' concept that Senator Gramm has proposed."

On March 3, 1999, ICP received a communication from Ms. Parry, stating in pertinent part that:

“I was distressed to read... the totally erroneous report that I am ‘promoting and supporting’ the safe harbor concept proposed by Senator[] Gramm. I am not, in any way, promoting or supporting this concept. I have not spoken with any member of Congress or their staff regarding this issue. Nor have I made any public statements regarding the CRA proposals that are being discussed in conjunction with financial moder[]nization. Whoever gave you this information is make a serious error.

"In fact, I personally do NOT support a safe harbor for all satisfactory and outstanding rated banks. I have long felt that banks with ‘outstanding’ ratings should be given a positive incentive to become and remain ‘outstanding.’ I am certain there are a number of ways that this could be done, with the safe harbor for ‘outstanding’ being only one option.

"I am requesting that you correct the information on your web site immediately.... I look forward to hearing from you. I am also faxing this to you.”

--03/03.99, 11:28 AM, to [CRA [at] innercitypress.org]

ICP agrees that this matter deserves clarification, or, amplification. As ICP has explained to Ms. Parry, one of its correspondents was informed, with specificity and credibility by well-placed “inside the Capitol” sources, of Ms. Parry’s position supporting a “safe harbor,” and that this position is playing a material role in the negotiation of legislative language, particularly in the Senate. Ms. Parry has stated that she has not, during the current Congressional session, lobbied for a CRA safe harbor. ICP believes it altogether possible that Senators who are not opposed to the safe harbor proposal have latched onto Ms. Parry's prior public statements (like the ones set forth immediately below) to support or justify their own positions.

From the public record, see U.S. Banker magazine of August 1997, at 44 et seq.:

"USB: So you’d like a safe harbor provision?

Parry: Yes... There was a lot of debate about [a safe harbor] in the process of re-developing the regulations. And there was too much negative reaction by the community advocates. It may be that a safe harbor for banks would be a good idea. It went down in flames because the industry couldn’t support it"

See also, New York Newsday of April 30, 1996, at A29:

"'It's our view that oustanding banks should be given some consideration,' said Parry. Bankers want a safe harbor -- freedom from challenges to their merger applications -- if they get good ratings."

In a subsequent interview, Ms. Parry has told ICP that at Chase, it is the Government Relations department which is dealing with the proposed financial modernization legislation, and not her Community Development department, and that, if asked to testify before Senator Gramm’s Banking Committee, she would not support a safe harbor for banks with a “Satisfactory” rating. Asked for amplification of her written statement to ICP that “banks with ‘outstanding’ ratings should be given a positive incentive to become and remain ‘outstanding.’ I am certain there are a number of ways that this could be done, with the safe harbor for ‘outstanding’ being only one option,” Ms. Parry stated that she has not given this much thought, but that one idea would be some form of expedited approval for banks with Outstanding ratings. Repeated reference was made to the Administration’s probable veto of any legislation that would weaken the CRA.

In relation to the other story reported below, of Senator Gramm’s January 12, 1999, statement that “[W]e will take a look at the whole CRA law... I am asking the Federal Reserve Bank [sic] to undertake a major study and survey... to try to build a database so that we have something to work from in this area... what I have asked the Federal Reserve Bank to join me in, is to try to come up with language...”. (Federal News Service, January 12, 1999), ICP asked Ms. Parry, who is on the FRB’s Consumer Advisory Council, whether this matter has arisen at the CAC meetings. The last such meeting was in December, 1998, before Senator Gramm’s request, but Ms. Parry states that she anticipates the issue arising at the next CAC meeting, later this month. As a perhaps unprofessional aside, ICP wishes to express its appreciation for Ms. Parry (and all others’) clarification. There is more to report, but this clarification is being made on an expedited basis, pursuant to Ms. Parry’s request (see above).

As a further update, ICP has submitted a Freedom of Information Act request to the FRB for documents relating to Senator Gramm’s request, and, on March 2, 1999, was informed by the FRB that its FOIA request will NOT be afforded expedited treatment, because ICP has not, in the FRB’s view, shown the “urgency to inform the public of [this] actual or alleged Board action.” It is hard to imagine what WOULD meet the FRB’s undefined standard of “urgency” -- Senator Gramm’s proposed legislation, including CRA provisions based on this views and presumably on the more detailed information he requested from the FRB is scheduled for mark-up this week. Updates forthcoming.

* * * * *

March 1, 1999 Update:

In the House of Representatives, efforts continue to combine and reconcile Rep. Leach’s and Rep. LaFalce’s versions of financial deregulation legislation. The most recent draft is said to follow Rep. LaFalce’s somewhat stronger CRA language -- but Republicans are certain to try to water this down during markup.

Meanwhile, at the Senate Banking Committee hearing on February 24, Senator Gramm finally came forward with a concrete purported example of the CRA abuses he is campaigning against. It involves a complaint by the son of a billionaire in Arkansas, that his bank (First National Bank of Rogers) was given only a “Satisfactory” CRA rating by the OCC. We’re telling you, it just... shocks the conscience In fact, in January 1999, First National Bank of Rogers, despite its Needs to Improve rating for community development investments, received an OCC approval, on an application covered by CRA: See OCC Decision # 86, Application by First National Bank & Trust Company, Rogers, Arkansas, to purchase the Harrison, Arkansas branch of Arvest Savings Bank, Tulsa, Oklahoma. (Control Number 98SW020069), WP 01/28/99.

Senator Gramm also made the following confusing (or would that be “confused”?) concession at the hearing: that he is open to have CRA be considered when any financial holding company makes an acquisition or expansion. Here’s what was said:

FEBRUARY 24, 1999, WEDNESDAY
SENATE DIRKSEN OFFICE BUILDING, ROOM 106
WASHINGTON, DC

...SEN. SARBANES: Can I ask the chairman a question, because I want to be sure of the facts. As I understand your draft, one of -- if a bank moved to have expanded powers, for instance, with a security firm or an insurance company or a mutual fund, there'd be no opportunity to raise CRA questions, would there?

SEN. GRAMM: Yes, because he's under the Holding Company Act and any new activity under the Holding Company Act has a CRA evaluation. Now, we don't -- he doesn't have to -- we don't create a new holding company so that the actual creation involves an expansion, but for example, under current law, if I want to open a branch, that's a new action and I've got to get CRA approval. If I --

SEN. SARBANES: That's right. Now, would you have to have an application to acquire these companies and expand your powers, under your draft?

SEN. GRAMM: You will have to -- it'll have to be approved, yes. Well, let's sit down and -- let's sit down and look through --

SEN. SARBANES: What has to be approved? There's no application provision here.

SEN. GRAMM: Well, you've got a presumption, you act, and then you would have an evaluation. CRA would be a factor in that evaluation. But this is an area that we might look at. If -- I have assumed that any action under the Holding Company Act would require input on CRA, and if you want it explicit, that may be something we could work out.

SEN. KERRY: Well I thank the chair, and I think that was a helpful -- a helpful colloquy, I think...

--Emphasis added.

It remains to be seen if Democratic Senators Sarbanes and Kerry actually follow up on this public invitation, and if Senator Gramm doesn’t change his position...

At that Senate Banking Committee hearing, OTS Director Ellen Seidman opposed both Gramm’s safe harbor and “anti-extortion” proposals, stating that the first “does not take into account factors such as the time between CRA examinations, changes in an institution's business strategy or geographic reach subsequent to an examination (including changes that would result from approval of the application at issue), and the inability of regulators to fully cover all aspects of a far-flung institution's business during an examination that does not overburden either the institution or the regulators.”

Ms. Seidman (along with the Department of Justice) also opposed Gramm’s “anti-extortion” proposal, stating that it would “reduce public participation in the application process and the amount of information regulators have on which to base their decisions.” In this era of financial chaos and bail-out (like the Federal Reserve’s bail out of Long Term Capital Management), one would like that Congress would want the regulators to have more, rather than less, information. Updates forthcoming.

CRA NEWS FLASH, March 1, 1999 [See also amplification, above, dated March 3, 1999] -- ICP’s Community Reinvestment Reporter has been informed, by knowledgeable “inside the Beltway” (make that, “inside the Capitol”) sources, that the CRA officer of Chase Manhattan Bank, Carol Parry, is actively promoting and supporting the “safe harbor” concept that Senator Gramm has proposed (which would help her bank evade public comment, as it makes the acquisitions that market observers opine it must make in order not to be left in the dust). Developing... [See amplification above, dated March 3, 1999].

* * * *

For nearly a year now, Congressional Republicans, led by Senator Phil Gramm (R-TX), have been referring to the Community Reinvestment Act (CRA) comment process as “extortion,” as “blackmail,” as being akin to organized crime’s shakedowns of small businesses.

At the beginning of 1999, Gramm put in place, as staff of the Senate Banking Committee, a three-woman CRA attack squad: counsel Dina A. Ellis, chief counsel Linda L. Lord, and spokeswoman Christi Harlan, until recently the Austin American-Statesman’s Washington correspondent. (Ms. Ellis is also an ex-journalist, having been a reporter for the Baltimore Daily Record in 1995, before becoming legislative counsel to Rep. George Gekas, R-PA).

Senator Gramm has openly asked the Federal Reserve Board to poll banks, with a promise of confidentiality, with whatever anti-CRA stories the banks are willing to provide on that basis. Counsel Dina Ellis has been telephoning community groups, asking for documents to support Senator Gramm’s crusade. Meanwhile, a “Senate Banking Committee spokeswoman” (presumably Ms. Harlan) has claimed, “There is no prejudgement of what we expect the Federal Reserve to find.” (Dean Anason, American Banker, Feb. 8, 1999, Pg. 4).

We shall see. Stay tuned...

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