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The Color of Money

Follow-ups and reaction

Atlanta banks surprised to be focus of U.S. redlining probe

From Staff and Wire Reports, The Atlanta Journal-Constitution

Published April 25, 1989, Page A1

Copyright 1989, The Atlanta Journal-Constitution

Local bank officials, citing recent steps taken to eliminate possible racial discrimination in mortgage lending, expressed surprise today that the U.S. Justice Department is investigating all 64 banks and savings and loan associations in metropolitan Atlanta.

"We are surprised that Atlanta was the city the Justice Department picked for its investigation, considering all the activities that have taken place in the last year," said Bo Spalding, director of communications for Bank South. "I wouldn't be surprised if after all of this, Atlanta has a rather exemplary record of minority lending."

In letters that began arriving Monday, the department's Civil Rights Division disclosed the largest investigation ever of redlining -- the refusal to lend on the basis of race or other factors unrelated to creditworthiness. Redlining is forbidden by the Equal Credit Opportunity Act and the Fair Housing Act.

The letters met with sharp denials in the executive suites of Atlanta's banks, which have been buffeted for a year by newspaper articles describing racial disparities in lending patterns.

"We do not discriminate. We do not discriminate. We do not discriminate," said Willis Johnson, spokesman for Trust Company Bank, the third-largest Atlanta-based bank.

Dallas Lee, a spokesman for Citizens and Southern National Bank in Atlanta said he did not know if his bank had received a copy of the letter, but he said, "I'm sure the Justice Department will find a good level of cooperation among Atlanta's financial institutions."

The letters, signed by Acting Assistant Attorney General James P. Turner, give the lenders official notice that they are under civil investigation and ask them to make available voluntarily all loan records from the past five years. Officials at some banks said Monday that they would cooperate with the inquiry.

Justice also asks for answers to a detailed questionnaire about marketing, branch locations, loan authority, underwriting guidelines, training handbooks, real estate agent contacts, appraisal policies, and lists of employees by name and race.

U.S. Attorney Robert L. Barr Jr. declined to comment on the letters early today.

"It's a significant case," said Stephen M. Dane, a fair housing attorney in Toledo, Ohio. "I interpret it as a long-overdue but certainly welcome resurgence of interest at the Department of Justice in housing finance discrimination."

Advocates also read between the lines in the letters a rebuke to the four federal bank regulatory agencies: the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., and Federal Home Loan Bank Board. Although the bank agencies have reported declines in lender compliance with the Equal Credit Opportunity Act, they have not referred a case of credit discrimination to the Justice Department since 1978.

"It has to be a backhanded slap at the regulatory agencies," said Allen Fishbein, general counsel of the Center for Community Change, a neighborhood-advocacy group based in Washington. "You would think the normal investigation and enforcement process would weed out lawbreaking, but the regulatory agencies have been unable and unwilling to do that."

The four bank agencies said they are cooperating with Justice and see no rebuke.

The investigation was prompted by articles beginning in May in The Atlanta Journal-Constitution that disclosed a segregated mortgage system in which banks and thrifts made few loans in black areas, even in upper-income black areas, and often made mortgage services less accessible to black home buyers.

Atlanta's largest banks responded to the articles by pooling $77 million for low-interest mortgages primarily in black neighborhoods. A few of the largest banks also changed some policies, such as increasing contacts with black real estate agents. Many smaller institutions reported no changes.

With regard to lending practices, Mr. Lee of C&S said, "The banks in Atlanta have taken so many significant steps during the last year in terms of mortgage lending. I would think the banks would be far ahead of the rest of the country in terms of minority mortgage lending."

The Justice inquiry, going beyond information available to the newspaper, seeks records of actual loan applications and credit reports on mortgage applicants. If lenders comply with the Justice requests, investigators will be able to compare rejected applications by black home buyers with approved applications by whites.

Also receiving the Justice letter were private mortgage companies affiliated with banks, including Citicorp Mortgage Inc., a subsidiary of Citicorp, America's largest banking company. The Journal-Constitution disclosed in December that Citicorp called on real estate agents only in predominantly white neighborhoods in metropolitan Atlanta. Citicorp officials denied any intentional discrimination and said they had expanded their marketing program.

Atlanta bankers said the Justice investigation was expected, but they said they do not fear it.

"We don't feel we have discriminated overtly. I don't think there is a single instance of outright discrimination by any of the larger institutions," said James J. Wallace, director of communications for Fulton Federal Savings Bank, Georgia's largest savings institution. "We went back and reviewed every one of our declined applications. One black applicant had an income of about $50,000, but had nine separate VISA and MasterCard accounts and they were all up to the limit. That's just an example.

"If there was a problem," Mr. Wallace said, "it was in the method of obtaining applications. If the real estate brokers don't bring applicants to you based on previous experience, then you have a problem."


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Reprinted with permission from The Atlanta Journal and The Atlanta Constitution. Further reproduction, retransmission or distribution of these materials without the prior written consent of The Atlanta Journal and The Atlanta Constitution, and any copyright holder identified in the material's copyright notice, is prohibited.


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