The Banking industry is REQUIRED to perform racial profiles under CRA!

For three decades, regulations have protected loan applicants from the use of race, gender or ethnicity data in consideration of their application. But racial loan profiling may soon be required!

(1) Banking: Race-Based Lending, Credit Approval
News Stories and Background

Fed Wants to Know Race, Sex of Loan Applicants (10/26/99)
This proposed legislation means 'Less Privacy, More Litigation' if citizens don't call or write by Nov 10th, 1999!

WASHINGTON, DC - The Federal Reserve Board (FRB) plans to reverse a 25-year-old regulation known as "Regulation B" which prohibits banks from collecting racial, ethnic, gender, or religious data from loan applicants. The purpose of Regulation B is to protect applicants from being denied bank loans as a result of their race, gender or religion -- regardless of their skin color, gender, or national origin (even if the applicant is "white").

See Also: Ongoing Community Reinvestment Act News (More links and news)

However, if the FRB plans are enacted into law, banks will be required to collect data on loan applicants' color, gender, national origin, and religion. If Regulation B is rescinded, banks will be required to approve loans based on applicants' race, ethnicity and gender -- especially if those applicants are so-called disadvantaged minorities, as defined by the federal government.

"Our privacy will be severely compromised by the Fed's turnabout on Regulation B," said Lisa S. Dean, Vice President of Technology Policy at the Free Congress Foundation and leader of the effort to expose the proposed Know Your Customer regulations. "Now banks could reject your loan application just because you are the 'wrong' sex, have the 'wrong' skin color, or believe in the 'wrong' religion."

"Lawsuits will multiply because of this invasion of privacy," Dean continued. "Trial lawyers will love the opportunity to prove to a jury that their clients' application was denied because of their race, sex or religion. But I can't imagine that banks would be excited about that scenario."

Citizens can register opinions about the proposed change until November 10, 1999. To register your opposition to changes in Regulation B, Docket #R1008, comments can be made in writing to:

Jennifer Johnson, Secretary of the Board
Federal Reserve Board
20th & C Streets NW
Washington, DC 20551

Comments can also be made by phone at (202) 452-3259.

Ms. Dean warned, "Americans need to realize that Big Brother is going to keep chipping away at our constitutional rights. Regulation B is similar to the 'Know Your Customer' ploy that was defeated earlier this year. We need to stand up again and voice our concern against this new attack on our liberty."

The Fed implemented Regulation B after the Equal Credit Opportunity Act was passed 1974 and subsequently amended in 1976. Its original intent was (and is) to prevent race and gender discrimination in bank lending practices. Adversity.Net fully supports keeping Regulation B intact.

[Note: Lisa S. Dean is Vice President of Technology Policy at the Free Congress Foundation and is a leader of the effort to expose the proposed, intrusive Know Your Customer regulations which attempt to violate the privacy of your banking and financial transactions. The Free Congress Foundation is a 21-year-old Washington based think tank, which advocates judicial reform, teaches people how to be effective in the political process, promotes cultural conservatism, and works against the government encroachment of individual liberties.]

[link http://www.FreeCongress.org/press/releases/991026.htm ]

'Want a Loan? What's Your Race?' (10/15/99)
"When you fill out a credit card application or ask your local bank for a car loan or mortgage next year, you may be asked about your religion or race.

"Current law prohibits financial institutions from collecting such data, but a proposed federal regulation will allow loan officers to ask about and record color, national origin, and sex.

"The Justice Department has strongly urged collecting this information to aid in fair lending prosecutions, and some banks have said that it could be used in marketing and outreach programs. That's a prospect that horrifies some privacy advocates and Republican legislators, who are demanding that the Federal Reserve Board reconsider its plan.

"When seeking credit approval from a bank, the general public understands that the bank will ask for certain background information," House Majority Leader Dick Armey wrote in a letter to Fed chairman Alan Greenspan. "However, people usually expect to provide only pertinent information about their finances. A person's race or religion has nothing to do with his or her credit-worthiness."

"Armey said that there's no reason to permit banks to collect information about how people "worship God," and urged Greenspan to nix the plan.

"In a document distributed at a recent gathering of conservative groups, former Federal Reserve governor Larry Lindsey wrote, "Once such data is collected, any variety of suits can be brought if the characteristics of the loan portfolio and some definition of the bank's potential customer base don't match up. This will be particularly true in business lending where, traditionally, the Fed has held that businesses don't have races or genders." (Wired Digital 10/15/99 by Declan McCullagh)
[link http://www.wired.com/news/politics/0,1283,31533,00.html ]

Click here for the Federal Reserve's Official Press Release
[link http://www.bog.frb.fed.us/boarddocs/press/BoardActs/1999/19990804/ ]

Click here to download the complete Text of the Proposed Regulation
[link http://www.bog.frb.fed.us/boarddocs/press/BoardActs/1999/19990804/R-1008.pdf ]

Related / Similar:

(Editorial) Redline act retirement overdue (10/21/99 - no link)
"Congressional attempts to enact banking and financial services reform in recent years have stumbled over the community Reinvestment Act of 1977 (CRA). That act was originally meant to deal with "redlining", the alleged refusal of banks to lend to residents of poorer urban, often racial-minority areas.

"The Clinton administration has enforced the act with vigor and wants to strengthen it in current reform legislation on Capitol Hill. But there is no evidence that such discrimination exists, and lots of evidence that the act harms both banks and their customers.

"Racial discrimination has unfortunately been part of this country’s history. Lending discrimination was banned in 1968 by the Equal Credit Opportunity Act. The Home Mortgage Disclosure Act of 1975 (HMDA) was enacted because banks and thrifts were charged with "redlining" older central-city neighborhoods and minorities. (Mortgage banks were exempt until 1990 and other lenders still are exempt. That gave a distorted picture about the availability of credit in certain neighborhoods.) The idea of HMDA and CRA was to allow the public and bank examiners to see where and to whom mortgage loans were being made. But a bank would face serious potential problems if it had to get approval from regulators for some change in its status, for example, merging with or acquiring another bank. A lending record not considered in the "community interest" could delay or kill such approval. Even if the regulators had found nothing wrong, others could delay approval by filing a complaint, which might be withdrawn after they got what they wanted, such as the banks’ financial support for their preferred projects or organizations.

"Try as they might, CRA supporters are hard-pressed to uncover racially motivated loan discrimination. ... FDIC economist David Horn in 1997 [re-examined the data from a 1992 study of FDIC 70 supervised banks, and] concluded that ... relevant measures of a borrower’s credit history, such as past delinquencies and whether the borrower met lenders’ credit standards, explained the difference between lending levels to blacks and whites. In fact, 49 of the 70 banks studied did not reject nay minority applicants. Two of the remaining 21 were responsible for half of the denials of black applicants. One of those banks was minority-owned, and the other had extensive minority outreach programs.

"... Other evidence of a lack of racially motivated loan discrimination is found in the fact the FDIC must turn over to the Department of justice evidence of such discrimination. Of some 8,000 banks and thrifts monitored, DOJ referred only four cases in 1992, 13 in 1993, 25 in 1994 and 10 in 1995. Of those 48 referrals, legal action was taken in only six cases, of which four were settle by consent agreements.

"...CRA has been costly to banks and thrifts. Direct costs include preparing the required HMDA and CRA reports, hiring compliance officers and dealing with CRA examiners. Indirect costs include those involved by delay in obtaining regulatory approval for mergers, acquisitions and branch changes; legal costs incurred in replying to unfounded complaints; and costs for paying off "community activists" with unprofitable loans.

"... Banking deregulation and improved technology have resulted in a national, indeed, an international, market for home mortgages. In most communities, potential home buyers and real estate brokers can place mortgages, often with hundreds of lenders. Newspapers carry comparative rates. Information and applications can be obtained by telephone or through the Internet. Consequently, it is very likely that all profitable demand for mortgages is met.

"CRA is costly and unnecessary red tape that makes it more difficult for financial institutions to serve their customers. Its repeal, not expansion, would help both banks and home buyers." (Washington Times Commentary 10/21/99 page A21 by George Benston)
[no link]

Keep Banks Colorblind (09/17/99 - no link)
"For 25 years, the Federal Reserve Bank has barred banks from collecting [racial, ethnic, and gender] profile data from loan applicants. Now it wants to lift the prohibition.

"Trial lawyers are already salivating. The Equal Credit Opportunity Act was passed in 1974. It prohibits financial institutions from discriminating against credit applicants based on race, color, religion, national origin, sex, age or marital status. Regulation B -- which prohibits banks from collecting the data from applicants -- was intended to see that banks took none of those factors into account in granting credit. In other words, it was a color- blind regulation.

"Now, for the second time in three years, the Federal Reserve is trying to lift the prohibition. Such data collection at first would be on a voluntary basis. But given the government's reliance on numerical analysis to ferret out alleged discrimination, it's reasonable to assume the profiling would be made mandatory in the near future.

"... Crusaders will rant against perceived disparities in credit extension -- more whites than blacks get loans, more men than women. And those crusaders won't have trouble enlisting lawyers in their cause. Lawyers have perfected the art of transferring wealth through the courts.

"There's a good chance the numbers will show that minorities and women get fewer loans -- not because of their gender or skin color, but because of their creditworthiness.

"A study by the Federal Reserve Bank in Boston showed that blacks were denied mortgages more often than whites. The denials weren't based on race. They were based on default rates.

"The proposed changes of Regulation B will be out for public comment until Nov. 10 [1999]. The ban on collecting race, gender and religion data should be kept. It upholds the principle of a colorblind society, where success is based on merit and achievement. And it keeps trial lawyers and the government from engaging in all sorts of mischief." (Investor's Business Daily 09/17/99 editorial)
[no link]

Congress (Wash., DC): Civil Rights Groups Shift Focus to Financial Arena (05/10/99 - dead link)
WASHINGTON -- "In a sign of the ways that both Congress and the leading civil rights groups have changed over the years, some of the biggest civil rights battles now are not about affirmative action plans or school choice, but about access to bankruptcy protection and bank loans.

"On Wednesday, the House of Representatives passed a bill by a veto-proof margin that would make it much harder for American families, particularly women and the elderly, to have their debts erased through bankruptcy proceedings. A day later, the Senate adopted a sweeping overhaul of the nation's financial system sponsored by Sen. Phil Gramm, R-Texas, that would also eliminate many of the provisions of the Community Reinvestment Act, a 1977 law that requires banks to make loans to residents of inner cities, farmers and others who have traditionally been denied credit.

"Civil rights groups, which have suffered from dwindling public support and significant court setbacks in the affirmative-action fight, stormed Capitol Hill last week hoping to remove provisions from both bills that would [remove race-based protections and privileges] the [minority, racial and ethnic] groups had [achieved through racial intimidation] more than 20 years ago. The groups that actively lobbied against the measures included a variety of organizations representing the interests of minorities, women, American Indians, the elderly, urban areas and farmers. And liberal Democrats in both chambers said that the votes on the two measures could be the only major civil rights votes in the 106th congressional term. But so far both the House and Senate have rebuffed the recommendations of the civil rights groups and the Clinton administration." (NY Times 05/10/99 by Stephen Labaton)
[former link **http://www.nytimes.com/yr/mo/day/news/washpol/congress-civil-rights.html]

Bank of America: CEO Thumbs Nose at Racial Quota Intimidation (01/14/99) (dead link)
A bank CEO who makes sense! "While pledging to spend $350 billion nationwide on community reinvestment over 10 years, including at least $70 billion in California, Bank of America CEO Hugh McColl repeated his opposition to being dictated to by groups such as the Greenlining Institute or the California Reinvestment Committee, two minority lending advocates that have pressed McColl to set specific lending goals in California. 'We're willing to sit down and talk about it, but we won't respond to threats, demands or anything else. We don't do that,' McColl said in an interview with The LA Times on Wednesday."

Using threats of minority bias suits, the minority pro-quota groups have wrested race-based lending commitments from Wells Fargo and Washington Mutual to meet specific minority lending goals and to make their minority-lending data public. Mr. McColl and Bank of America will have none of it, and Adversity.Net lauds them for resisting intimidation by the racial special interests. BUT: how long do you think it will be before Bill Lann Lee's Department of Justice Office of Civil Rights threatens McColl and Bank of America with years of expensive legal action if they don't submit to racial quotas in lending? (LA Times, 01/14/99, by Liz Pulliam)
[former link *http://www.latimes.com/CNS_DAYS/990114/t000003867.html]

Banking, General: Urban bank loan shakedowns targeted (01/19/99)
"Sen. Phil Gramm, the new chairman of the Senate Banking Committee, last week proclaimed that the Community Reinvestment Act was resulting in banks being compelled to make 'kickbacks and bribes' to [minority] activist groups -- a process Mr. Gramm said 'is little more than extortion.' Mr. Gramm's denunciation could open the door to the exposure of some of the worse bureaucratic abuses occurring across the land."

"The Community Reinvestment Act of 1977 was supposed to prevent banks from taking deposits in one neighborhood and making loans in other neighborhoods. But since President Clinton took office, the federal government has largely ignored the law and instead relied on massive threats against banks to force them to loan more to favored groups. As former Assistant Treasury Secretary Paul Craig Roberts observed, 'The Justice Department is simply trying to establish by consent decree [also known in the Clinton administration as 'Alternative Dispute Resolution', or ADR] a system of racial quotas in lending regardless of credit risks." (Washington Times, page A16, by James Bovard, 01/19/99, no link available.)

Massachusetts (Boston): Pro-quota Groups Want More Race-Based Credit (02/04/99 - dead link)
"A decade after the Federal Reserve Bank's groundbreaking study of discrimination in lending, [a pro quota] group says challenges still remain in closing the credit gap between white- and minority-owned businesses, though the situation is improving.

"A report released Thursday by the Boston-based Organization for New Equality concluded minorities were less likely than whites to own their own businesses [without considering the minority businesses’ expertise, track record, or credit-worthiness], and if they [minorities] did [own their businesses], they were less likely to finance it through commercial banks [without any mention of their specific credit-worthiness or business acumen, nor did the report provide any valid statistical data showing racial bias causality for the reported gap.].

"The [pro-quota] group cited census data showing minorities made up 27.8 percent of the U.S. population in 1998, but owned only 16.3 percent of domestic businesses [but the report made no reference to any data pertinent to these minority businesses’ business ability nor to their track records].

"[The pro-quota report by the so-called ‘Organization for New Equality’] follows findings from the Treasury Department and the Small Business Administration's 1995 National Survey of Small Business Finance. The survey found that while commercial banks are the most prevalent source of funding for small businesses nationwide, only 41 percent of minority business owners get their financing there. That compared to 51 percent of whites." The pro-quota ‘Organization for New Equality’ declined to provide data supporting either the profitability or the business expertise or qualifications of the so-called disadvantaged minority businesses. (Associated Press, via the NY Times, 02/04/99)
[former link **http://www.nytimes.com/aponline/f/AP-Minority-Business.html]

END (1) Banking: Race-Based Lending, Credit Approval