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Banking Rules

September 14, 1993

* Representatives of the political extremes, House Banking Committee Chairman Henry Gonzalez (D-Tex.) (letter, Aug. 17) and Paul Craig Roberts (Column Right, July 27), have already taken shots at each other over banks' community reinvestment responsibilities. Let me give you a community banker's perspective.

Contrary to Gonzalez's assertion, the Community Reinvestment Act doesn't "challenge banks to lend to credit-worthy individuals regardless of where they reside." Instead, bank examiners who enforce CRA challenge banks to compile massive files to prove that they know their communities and are trying to make loans in those areas.

For a community bank like mine this exercise is unnecessary and expensive. Even if CRA didn't exist my bank would be committed to making local loans. Here's why:

First, we are tied to our community; if it prospers, then so will the bank.

Second, over the long haul, banks must lend to be profitable. They can't rely on taking in deposits and using the money to buy government securities; the profit margin is too small.

Third, long before CRA existed bank examiners insisted that banks make their loans in their own market area. That's a safer and sounder way to run a bank.

The current CRA process adds nothing to these three powerful incentives. Community bankers don't need CRA examiners to tell them to serve their communities.

GENE W. HOBDAY

President, Bank of Anaheim

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