The Atlanta Journal and Constitution

March 25, 2003 Tuesday Home Edition

Lending bill's gray areas overlooked

By Jim Wooten

The emotional fight over Georgia's so-called "predatorylending" legislation was simplistically cast as good vs. evil.The reality is more complex.

The good guys, those on whom the "consumer protection" mantleof selfless advocacy was bestowed, were in all accounts fightingto keep greedy lenders who would steal the homes of elderlywidows, the bad guys, from "gutting" Georgia's Fair LendingAct.

The debate never got much more complicated --- though, asHouse Speaker Terry Coleman (D-Eastman) discovered, it did getmore personal.

That's not surprising. Personal confrontation directed atbankers and politicians has allowed the Neighborhood AssistanceCorporation of America, the nonprofit leading the charge onGeorgia's predatory lending law, to build a 30-state businessusing $4.3 billion in banks' money. Not bad for an organizationspawned a dozen years ago by a Boston local of the HotelEmployees and Restaurant Employees Union.

"We're not violent, obviously," says Bruce Marks,NACA's chief executive officer, "but we areconfrontational and we do personalize the fight. When the speakerdecides he's going to be the tool of the lenders and thepredatory mortgage brokers out there, he should be takento task."

After Coleman met with Marks and others, and declined todirect House approval of the Senate bill that NACAfavored, he got a taste of the treatment. "Behind the scenes hehas used his control of the House of Representatives and itsagenda to gut this vital civil rights legislation," NACAdeclared in a flier headlined: "NACA pulls curtain onState's Wizard of Oz."

The flier is a mild version of the tactics that have inducedbanks to provide billions for low-income loans, for whichNACA collects a fee of $2,000 per mortgage. Itsstrategy of harassing top executives of lending institutions hasgarnered commitments of $4.3 billion from lenders such as theBank of America, First Union Corp., and FleetBoston FinancialGroup, among others. The bulk of that, $3 billion, came from Bankof America.

"We believe all banks are evil --- out to maximize profits atthe expense of working people," Marks told The American Bankermagazine. "The exception was Bank of America. We didn't need toget in their face."

For the borrower with bad credit, the subsidized loans are agood deal. NACA earns about $10 million per year making300-400 loans per month for the banks. Borrowers are asked toparticipate in five actions per year, which may include protestsagainst banks, demonstrations or phone campaigns. And, whileNACA as a nonprofit cannot recommend political candidatesto its 200,000 members across the country, "it can educate peopleon where different politicians stand on various issues," saysMarks.

So why do banks offer subsidized loans for NACA?Simple. NACA can cause banks plenty of trouble --- notonly with its public relations but with regulators as well.

Activist groups, recognizing in the 1980s that the nation hadlost its appetite for new entitlement programs, turned theirattention to the private sector. By working through regulators,they were able to "create" social programs with private-sectorfunding. The costs are taken from profits or, more likely, spreadto other consumers.

Banks must get permission to merge. But before they can do so,they must prove, under the Community Reinvestment Act of 1977,that they are serving the entire community, including low- andmoderate-income neighborhoods.

The wave of mergers in the 1990s gave groups such asNACA great leverage. Their challenges to regulators andtheir confrontational tactics forced banks to buy peace.

The former chairman of the U.S. Senate Banking Committee, PhilGramm of Texas, whose 1999 legislation required more openness andaccountability on agreements between banks and groups likeNACA, said threats to block mergers may have crossed theline into "extortion."

So is one guy good and the other bad? Rarely is life --- orlegislative conflict --- so simple.

Jim Wooten is associate editorial page editor. His columnappears Tuesdays, Fridays and Sundays.

This article is reprinted here for non-commercial,educational, fair use purposes only.