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The Color of Money

Editorials and Letters

In Atlanta and in Detroit, bankers need to reinvest

The Atlanta Journal

Published June 6, 1988, Editorial Page, Page A10

Copyright 1988, The Atlanta Journal-Constitution

Bank-lending reform has traveled north and landed on the conference table of Detroit Mayor Coleman Young. After passing around The Atlanta Journal-Constitution's banking series, "The Color of Money," Young garnered $40 million in conditional lending guarantees from 10 Detroit banks.

Young was able to get the promises on the strength of an Atlanta report because bankers suspected that a similar examination of lending practices there would bring similar results. In fact, an analysis of most major cities' bank-lending practices probably would bring similar results -- all the more reason for those cities to examine their banks' lending patterns.

The federal Community Reinvestment Act says banks have an obligation to "help meet the deposit and credit needs of the local communities." Banks also are graded on services that they provide to poor communities.

The latest numbers show bankers aren't doing the job they ought to be doing. Though 56 percent of the poor had checking accounts in 1977, by 1983 that number had dwindled to 44 percent. The young, too, traditionally a low-income group, have also been turned away from banking services. While 11 percent of young people had no checking or savings account in 1977, by 1983 22 percent had neither account. The level of banking services to the poor is dwindling.

And further evidence of banks' uneven servicing comes by way of Chicago. Chicago Banker Mary Houghton wrote recently that bankers consider it "easier and more profitable to make a $200,000 mortgage loan in an appreciating suburb than four loans of $50,000 each to working-class blacks in a city neighborhood." That kind of thinking may pervade America's banking community.

The trouble with such thinking is that the four inner-city residents deposit funds in the bank, just as the one suburbanite does. They are therefore entitled to, and should demand, a fair level of reinvestment in their communities.

We're pleased our series had an impact on perceived lending imbalances in Detroit; even more pleased that new loan opportunities will flow to inner-city residents there.

But more civic leaders need to follow the lead of Atlanta's City Council pres ident, Marvin Arrington, and Detroit's Mayor Young. Community reinvestment is the law, and bankers, obviously, need to be reminded of it.


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