- The increasingly rapid rate at which financial institutions are merging has prompted a challenge from a national coalition of community organizations, which is working to ensure that major lending institutions’ merger activities result in increased access to credit and capital for low- and moderate-income communities.
“Too often, the benefits and costs of mergers have been shared unequally,” said National Community Reinvestment Coalition (NCRC) President and CEO John Taylor, testifying before the House Committee on Banking and Financial Services in April. “[M]ergers are . . . harmful to small businesses and residents of minority and lower income neighborhoods. After mergers, bank fees increase, lending declines, branches close, and teller and other bank jobs disappear from these communities. On the other hand . . . [s]hareholders of the acquired institution realize higher dividends after the sale of their bank, while senior management receive golden parachutes worth tens of millions of dollars upon their departure.”
The NCRC-led coalition is challenging Congress to consider several measures to hold financial institutions responsible to the communities in which they operate. Under the coalition’s proposed guidelines, lending institutions would develop Community Reinvestment Act (CRA) commitments through a process that involves community leaders, provides specific information about loans to be given, and offers a plan for monitoring that promise. The coalition is also asking Congress to apply CRA data disclosure and reporting regulations to all affiliates of bank holding companies, operating subsidiaries of federally-insured financial institutions, mortgage companies, finance companies, and large credit unions. Further, the group is pushing for a GAO investigation and report on the effects of mergers on local communities and for higher scrutiny during the government’s merger approval process.
Local groups have stepped up efforts against specific mergers as well. NationsBank and Bankof America, two banks that are planning to merge, recently announced a $350 billion, 10-year commitment to community development lending and investment, but a North Carolina watchdog group has promised to challenge the merger and calls the lending promise inadequate.
“The initiative is not specific, lacks accountability, and fails to address predatory lending practices by its subsidiaries,” said Peter Skillern, chair of the Community Reinvestment Association of North Carolina. The commitment also fails to indicate where the funds will be allocated, he added, heightening fears that NationsBank’s long-standing commitment to North Carolina communities will diminish as it becomes part of a huge national bank.
Law Strikes Out Innocent Tenants
- At least four elderly public housing residents in Oakland, CA are facing the loss of their homes under the federal “one-strike” drug law that allows for eviction for the wrongdoing of visitors or relatives. They’re fighting back, though, and are suing city and federal housing officials on the grounds that the evictions violate their civil rights. While the policy is designed to help rid public housing communities of drugs and criminals, the rule casts a net so wide that many law-abiding residents are becoming ensnared, falling victim to guilt by association.
The Oakland tenants include a 63-year-old woman whose mentally disabled daughter was found with drugs three blocks from the building and a 75-year-old man whose caretaker was caught with drugs. “Anybody who says that throwing out an 85-year-old grandmother is going to do anything meaningful about the drug problem is fooling themselves,” an attorney representing the tenants said in an Associated Press article (4/3/98).
The “one-strike” initiative allows public housing authorities (PHAs) to deny occupancy to applicants, as well as evict residents, on the basis of alcohol abuse, illegal drug-related activities, or criminal behavior. Merely an arrest, not a conviction, is necessary for eviction under the rule, and the infraction is often a result of the actions of the tenant’s family or visitors. Close to 4,000 public housing tenants were evicted in the six months following the policy’s implementation in 1996 – an 84 percent increase over the previous six months – according to a survey of half of the nation’s housing authorities. More than 19,000 applicants for public housing were denied units during that time because of criminal records. And more than 46,000 individuals have been barred from visiting public housing complexes under “exclusionary agreements” signed by tenants whose leases were threatened by their associations.
In Atlanta, public housing tenants called for a rent strike to protest that housing authority’s implementation of One Strike rules to the tune of 600 evictions in 16 months, including nearly half the residents of one complex, according to an article in the Atlanta Constitution (2/20/98). Boston residents have voiced opposition to the rules’ enforcement there as well; a number of parents there have been evicted because their children committed crimes while living with them, according to the Washington Post (2/4/98).
At least one effort against the policy has proven effective. The ACLU convinced a Southern California housing management company to stop evicting tenants for crimes committed by visitors, according to a UPI report (2/10/98).
(See Shelterforce #100 for the preliminary decision in the Oakland case.)