FOR IMMEDIATE RELEASE: CONTACT: CHRISTI HARLAN
Monday, July 17, 2000 202-224-0894

GRAMM COMMENTS ON CRA LENDING REPORT

Sen. Phil Gramm, chairman of the Senate Committee on Banking, Housing and Urban Affairs, made the following comments on the report of the Federal Reserve on the performance and profitability of lending under the Community Reinvestment Act:

"The results of the study are clear and consistent: CRA lending is significantly less profitable than ordinary lending, and the most unprofitable CRA loans are those that are made through special deals with CRA specialists and other third parties. I am astounded by the data that shows every third dollar lent through these special deals is lent at a loss.

"The results of the Federal Reserve's survey undermine the often-heard claim that CRA lending is good business that, prior to the CRA law, banks had ignored.

"The study demonstrates that CRA lending as it is now practiced is credit allocation that generates loans with higher delinquency rates and lower profit profiles than loans generated through normal channels.

"While this report largely refutes the argument that CRA lending is good business for banks and the American credit market, it is only the first step in taking the CRA debate from the realm of rhetoric to a discussion of hard facts. In the next Congress, I intend to call on the Federal Reserve to perform a more in-depth examination of CRA lending.

"In the meantime, this first round of data will go out to people of all political persuasions, and we can have an informed debate that will add to our knowledge and understanding of CRA."

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The Federal Reserve's report on the profitability of CRA lending was required under Section 713 of the Gramm-Leach-Bliley Act, which became law Nov. 12, 1999. The text of the report can be found on the Federal Reserve's web site, www.federalreserve.gov.