The Federal Reserve Board said yesterday it does not favor prohibiting geographical red-lining. This is the practice of refusing to grant credit within certain areas, often the inner cities.
The statement placed the Fed, the country's bank regulator, in opposition to the Federal Home Loan Bank Board, which regulates savings and loan associations. Last May the FHLBB issued regulations forbidding federal S&Ls from refusing to make loans on houses merely because they are old or located in urban communities where the ethnic make-up of the population is changing. They also prohibit undervaluing the worth of residences on the same grounds.
The positions of other federal regulatory agencies fall somewhere in between. At a House Commerce subcommittee oversight hearing yesterday chairman Benjamin Rosenthal (D-N.Y.) deplored the lack of unanimity of purpose among the agencies. "The public does not understand, he complained.
He summed up the agencies position as follows:
"The Bank board says it will prevent non-racial red-lining: the Federal Deposit Insurance Corp. says it has the authority to issue nondiscrimination regulations but is still studying the need for them; the Comptroller of the Currency believes that authority may be questioned by the courts and plans no action for at least two or three years; and the Fed says it has no authority and no interest in preventing non-racial redlining." The National Credit Union Association, incidentally, is aligned with the FHLBB.
A study commissioned by the Fed last spring and done by outside civil rights lawyer Warren L. Dennis concluded that the board has "appeared hesitant to issue an unambiguous statement of its commitment to vigorous enforcement of civil rights laws among state member banks and has not identified civil rights legislation as having any particular priority."
At yesterday's hearing governor Philip C. Jackson Jr. said the board was still studying the Dennis report. Then he added that at a Wednesday meeting the board had taken a stand against prohibiting forms of red-lining other than racial discrimination which is already outlawed by the Equal Credit Opportunit Act and other laws. He noted that geographic red-lining is not now illegal, although several bills have been introduced to bar it.
The Fed meanwhile prefers to be guided by the Community reinvestment Act Jackson testified. It directs that regulatory agencies "encourage institutions to help meet the credit needs of their communities (including low and moderate income neighborhoods) consistent with the safe and sound operation of those institutions."
The confusion among the agencies persists despite issuance of inter-agency, anti-red-lining enforcement guidelines last spring. Rosenthal observed it was clear to him the agencies regard them as minimum standards which they will tailor to their own purposes. He noted the guidelines contain no provisions for referring violators to Justice for prosecution.