|FOR IMMEDIATE RELEASE:||CONTACT: CHRISTI HARLAN|
|Thursday, April 8, 1999||202-224-0894|
GREENSPAN FINDS SIGNIFCANT EXPANSION OF CRA
IN HOUSE BANKING LEGISLATION
In response to a request from Sen. Phil Gramm, chairman of the Senate Committee on Banking, Housing and Urban Affairs, Federal Reserve Chairman Alan Greenspan and his general counsel prepared an assessment of the Community Reinvestment Act provisions contained in the House and Senate versions of financial services modernization.
"Contrary to some assertions that the House banking bill is neutral about CRA, Chairman Greenspan finds that the House version would significantly expand CRA mandates beyond current law," Gramm said. "Such expansions are not warranted in legislation that is aimed at improving consumers' access to financial services. We should be removing barriers, not building new ones."
Greenspan found "three principal ways" in which the House bill would affect the CRA:
-- Banks seeking to engage in the securities or insurance business would have to satisfy CRA mandates as a "precondition" for entering the new business.
-- Banks that don't satisfy the CRA mandates would face enforcement action in the form of penalties or divestiture of the new business.
-- Uninsured wholesale financial institutions would be subject to CRA mandates, even though they don't enjoy the benefit of federal deposit insurance.
The Senate bill, approved by the Senate Banking Committee on March 4, contains none of the expansions of CRA contained in the House bill. Instead, Greenspan noted, the Senate bill contains two CRA provisions:
--"An exemption from the CRA for small insured depository institutions that are located outside metropolitan areas," and
-- "A rebuttable presumption regarding an institution's compliance with the CRA."
Click here to read the text of Federal Reserve Chairman Alan Greenspan's April 7, 1999, Letter to Chairman Phil Gramm Regarding the Community Reinvestment Act