Tag Archives: financial reform

The Return of Lending Discrimination by Banks

Ohio Savings BankNew Orleans Finally there is some small notice of the fact that banks are abandoning the poor and their neighborhoods.  A report from the FDIC (Federal Deposit Insurance Corporation) found that almost 1000 net branches had been lost in 2010.  Certainly not surprising to anyone is that the loss has been much higher in lower income and minority dominated areas, while branches continue to explode in upper-income areas.  Fingers will inevitably be pointed in all kinds of different directions other than back towards the banks themselves:  the economy, bank closures, blah, blah, blah.

The next shoe to fall is going to hurt more.

A preliminary report I reviewed from A Community Voice, the membership community organization in Louisiana (www.acommunityvoice.com) of the results of their extensive data crunching of HMDA (Home Mortgage Disclosure Act) data on lending for 2009 (the most recent year available) reveal a significant return of racial discrimination in lending across impacting all minority segments.  The A Community Voice should be available in March, so we will see what conclusions they draw, but the early indications are deeply disturbing and were revealed in a hearing before a Department of Justice hearing in the Lower 9th Ward of New Orleans last night. I’m not sure where else the data is being reviewed or released, since this used to be an annual project of ACORN at least when I was there, but we should all keep our eyes out for these numbers.  They will not be pretty.

The much maligned Community Reinvestment Act (CRA) blamed so roundly and falsely by the right and Republicans as a whipping dog for the housing crash and the Great Recession for supposedly moving loans to the poor, was more appropriately characterized in a story in today’s Times.

“The C.R.A. has been a financial Maginot Line – weakly defended and quickly overrun,” said Raymond H. Brescia, a professor at Albany Law School.  What’s more, Mr. Brescia said, while closing branches violates the spirit of the law, if not the letter, he could not recall a single example in which a bank was cited by regulators under the C.R.A. for branch closures in recent years.  “The C.R.A. leaves banks a lot of leeway,” he said, “and regulators have not wielded their power with much force.”

And, frankly, Professor Brescia is guilty of understatement if anything.  Lending discrimination never really left, as he points out, but at least it receded and there were efforts made and lip service spent.

Given the huge setbacks in homeownership by minorities due to the recession, this should be a battleground widely engaged to attempt to recapture this ground, hold and extend the line again, but it will only be so, if we have the capacity and commitment to reengage banks and push back again with whatever weak tools we still are allowed.  If not, no army of “Elizabeth Warrens’ can prevent the implosion of payday lending, predatory financial institutions preying on the poor and moderate income families across the land.


Debit Charges and Senate Hucksters

Dodd-Frank Bill

Dodd-Frank Bill

New Orleans The Dodd-Frank Financial Reform Act called for the Federal Reserve to put an end to the debit card surcharge padding when that retailers were paying to banks and credit card companies, usually amounting to 44 cents a transaction.  New Fed proposals would cap the amounts at 7 to 14 cents, about an 80% reduction.  Hooray!

But banks and card issuers are crying like babies at losing this opportunity to scam consumers on the swipe.  Visa lost 10% of its value on the market yesterday.  Bank of America and Wells Fargo record as much as 2.5% of their revenue from this scam, according to the Wall Street Journal.

I love this not only because it is a win for the biscuit cookers, but also given ACORN International’s Remittance Justice Campaign, this is another indication of what at least one authority – the United States Federal Reserve – believes is the actual cost-plus profit of such a transaction.  With enough indirect data, eventually we will understand real costs, not just predatory pricing strategies.

This is also a boost for citizen wealth, if it turns out right:

“A $100 transaction today, for example, means merchants currently pay banks as much as $1.30 in debit interchange fees, according to figures provided by the Nilson Report. Under the proposals, the merchant would pay no more than 12 cents, said David Balto, a fellow with the left-leaning Center for American Progress.”

Hey, let’s have that buck back!

Here’s the head scratcher though, thirteen (13) United States Senators wrote a letter to Fed Chair Bernacke complaining that the card companies and banks were getting stiffed.  I badly want to know who these 13 are, since their names probably comprise something that will be as close as we can come to a list of the Banking and Credit Senators or Anti-Consumer Senators, someone should come up with a better name.  I have to admit to having been foiled even after a half-hour of searching since I was only able to come up with 7 of the 13 names, so anyone who knows speak up:

  • Richard Shelby (R-AL) (Senate Banking Committee)
  • Mark Warner (D-VA) (home state of Capital One!) (Senate Banking)
  • Chris Coons (D-DE) (corporate registry state for many of these companies)
  • Tom Carper (D-DE) (see above)
  • David Vitter (R-LA)  (WTF?)
  • Judd Gregg (R-NH)
  • Evan Bayh (D-IN)  (looking for a goodbye present?)