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<p>WASHINGTON – Judging from their comments on the issue, credit unions largely celebrated when the NCUA overturned the Community Action Plan regulation in late December 2001. But if the tides of politics on Capitol Hill change by a relatively few votes, observers say, credit unions could find themselves fighting legislatively to keep from being included in a “modernized” Community Reinvestment Act. For at least the last two years the National Community Reinvestment Coalition, related groups, and their Congressional supporters have reintroduced the CRA Modernization Act, a measure which would “require enhanced data disclosure such as race and gender in CRA small business data and the Annual Percentage Rate in the Home Mortgage Disclosure Act (HMDA) data,” NCRC wrote in a briefing paper about the bill. It would also “apply community reinvestment obligations to all sectors of the financial industry,” albeit while not naming credit unions specifically, NCRC said. As currently crafted, the measure would make subject to CRA all depository institutions as well as bank holding companies that engage in lending or offer banking products and services, NCRC said. Mortgage companies, insurance agents, and other non-traditional lending affiliates of holding companies would be required to comply with CRA as well. The bill would also extend “CRA-like” requirements to insurance companies and securities firms. Insurance companies would be required to publicly disclose data on the race, income and gender of their customers, NCRC said. Mergers between depository and non-depository firms would also be covered. The revitalized CRA would contain penalties for financial institutions and their affiliates, through reduced CRA ratings, if the institutions engage in predatory or other types of discriminatory lending “and other services that have a negative impact on the community,” the NCRC said. The bill would also require HMDA data to include information on loan pricing and terms. To be sure in the current political environment the possibility of passage of a revitalized CRA is remote, admitted Lynn Sheri King, Director of Legislative and Regulatory Affairs for the NCRC. “But every year we leave a marker and every year we build support for the measure,” King said. “We are confident that eventually it will pass.” The bill’s supporters likely feel confident because there is a sense that financial legislation and regulations generally need to be updated in the wake of the Gramm-Leach-Bliley legislation, said one longtime observer of financial legislation and politics. In fact, the NCRC cited the need for updating the law to meet the changed financial services environment. “The Gramm-Leach-Bliley Act . allowed many non-depository financial institutions such as securities firms and insurance agents to enter the lending business,” the NCRC wrote. “It also eliminated many federal barriers that prevented mergers and affiliations between such different financial institutions. Most of these mergers would not be subject to CRA review,” as the law is now structured. Bill supporters also point to economic analyses that show CRA has been meeting its goals to support revitalizing the law. “The Department of Treasury and Federal Reserve Board economists have found that CRA, fair lending laws, and CRA agreements increase the number of loans to minority and low – and moderate- income communities,” NCRC wrote. “CRA needs to be updated to take into account the tremendous changes in the financial industry if it’s to be as successful in the first decade of the 21st century as it was in the 1990′s,” NCRC added. Currently the bill is a dead letter politically. It has no Republican co-sponsors, and few of the stronger Democratic representatives have co-sponsored it either. Former Democratic Whip, Rep. David Bonior (D-Mich.) co-sponsored it, but he has stepped down as Democratic Whip and is expected to leave Congress to run for Governor of Michigan. Representative Henry Waxman (D-Calif.), long consumers’ advocate in a variety of arenas, has co-sponsored it as has Rep. Dennis Kucinich (D-Ohio), but they are about it for the bigger names. Part of the problem in getting co-sponsors has been difficulty getting the word out about the proposal, King said, but she acknowledged that part of it has been misgivings about the measure’s timing. According to an NCRC source, Representative John LaFalce (D-NY), ranking member of the House Financial Services Committee widely expected to take the Chair of the Committee should the control of Congress change hands, is sympathetic to the measure but did not co-sponsor it because he feared opening the law in the current political environment would result in a weaker bill overall. It seems certain that that should credit unions have to re-fight a battle over being included in CRA they may have to do so in a much different political environment. Since the last battle certain key allies, like Texas Senator Phil Gramm (R-Texas), have either left Congress or moved from their formerly powerful legislative positions. In addition, a relatively bruising fight over bankruptcy reform has strained relations with consumer groups which are usually allied with credit unions, noted one longtime banking observer. But Bill Donovan, NAFCU’s chief counsel, is not pessimistic. He stressed that is impossible to know what could happen to a legislative proposal in the future and noted that the Senate had repudiated the idea of extending CRA requirements to credit unions as part of the debate over 1151. Donovan noted that banks are able to get CRA credit through helping low income credit unions. “It would be a tremendous irony if the institutions which banks have been able to use to earn CRA credits would, in turn, be told they had CRA requirements,” he said. One representative who almost embodies the divide between consumer finance advocacy groups is Stephanie Tubbs-Jones (D-OH), who gave a rousing speech at the GAC in support of credit unions and who, later the same week, addressed the NCRC’s annual meeting down the street. “I firmly support credit unions,” Tubbs-Jones said. “I think credit unions are tremendous resources for bringing financial services into long neglected communities. But I also firmly believe that all financial institutions have community reinvestment obligations,” she said. Credit unions should be able to show what they are doing to serve low-income communities, she added.</p>

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