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The Color of Money

Follow-ups and reaction

Senators give a lecture to U.S. bank regulators On bias in home loans;
Atlanta article on racial patterns leads to hearing

By Scott Shepard, The Atlanta Journal-Constitution

Published October 25, 1989, Page A3

Copyright 1989, The Atlanta Journal-Constitution

WASHINGTON -- Senate Banking Committee members scolded federal bank regulators Tuesday for failing to detect and prevent widespread racial discrimination in home mortgage lending.

At a subcommittee hearing, the senators disputed the contention of regulatory agency representatives that statistics on mortgage lending do not prove the existence or extent of racial discrimination.

"I am not a statistician," said Sen. Alan Dixon (D-Ill.), "but when blacks are getting their loan applications rejected twice as often as whites -- and in some cities, it is three and four times as often -- I conclude that discrimination is part of the problem."

The Banking Committee's consumer and regulatory affairs subcommittee began its review of mortgage lending practices last fall after a series of articles in The Atlanta Journal-Constitution.

The Pulitzer Prize-winning series found that whites received five times as many home loans from Atlanta banks as blacks of the same income and that race consistently determined the lending patterns of Atlanta banks.

At Tuesday's hearing, representatives of four federal bank regulatory agencies questioned the conclusions reached by the Journal-Constitution's analysis of $6.2 billion in Atlanta home loans from 1981 through 1986.

John P. LaWare, a member of the Federal Reserve System's board of governors, said the Journal-Constitution study, along with similar studies by newspapers in Detroit, Cleveland and Boston, "provide useful, but limited insight into the issue" of lending discrimination.

Mr. LaWare said the Federal Reserve System's studies "do not draw definitive conclusions about the existence of racial discrimination" in home mortgage lending.

Jonathan L. Fiechter, a senior deputy director at the Treasury Department, acknowledged that on a nationwide basis, blacks are rejected for mortgage loans twice as often as whites.

"This ratio, however, only suggests the possibility of unequal treatment," Mr. Fiechter added. "It does not indicate that (lending institutions) are engaged in racial discrimination."

And Robert J. Herrmann, a senior deputy comptroller in the Office of the Comptroller of the Currency, insisted that "making conclusive judgments on whether a bank is employing illegal discriminatory practices is, at best, a difficult task."

Mr. Dixon, the subcommittee chairman, said he found it "somewhat incredible" that the regulators would make such assertions.

"We still have discrimination in lending," the senator said. "The problem today is not lack of laws, it is lackluster enforcement.

"It may be that discrimination today is more institutional than intentional, more a prejudice against a neighborhood than a person, more a matter of giving white applicants the benefit of the doubt than showing black would-be borrowers the door," he said. "But it is still wrong. It still has the same harmful effect."

The subcommittee members urged the regulatory agencies to develop better methods of monitoring data from mortgage loan applications in order to detect discrimination.

They also suggested that the agencies consider establishing independent offices specializing in the prevention of racial discrimination in mortgage lending.

Mr. Dixon said his subcommittee would ask the regulatory agencies for their recommendations next spring.


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