U.S. Attorney General Sends Signal to Bankers Serving Native Americans Story-Date: 05:50 p.m. PST Sunday , August 10, 1997 U.S. Attorney General Sends Signal to Bankers Serving Native Americans BY JERRY REYNOLDS, INDIAN COUNTRY TODAY, RAPID CITY, S.D. Knight-Ridder/Tribune Business News WASHINGTON, D.C.--Aug. 11--Attorney General Janet Reno continues to keep the considerable heat of her office turned up high under banks serving Indian country. In her keynote remarks last month at a ``Banking in Indian Country'' conference co-sponsored by the Justice Department and the Office of the Comptroller of the Currency, Attorney General Reno congratulated banks for improving their provision of credit, services and consumer education to Indian country. But she said that wanting to do the right thing is not enough: even banks that want to do the right thing will be prosecuted by her office if they fail to do the right thing, she said. As her deputy chief for housing and civil enforcement, Joseph Rich, explained on a later panel, discrimination in loan denial and pricing usually takes place not at the policy-making level, but at the point of decision. After Ms. Reno's remarks, banks that rely on having non-discriminatory policies in place without monitoring the actual practices of their decision-makers cannot assume they are in the good graces of this Justice Department. Ms. Reno has brought two high-profile cases against banks serving the Pine Ridge Reservation -- one against Blackpipe State Bank in Martin, S.D., in 1993, and the other, recently settled, against First National Bank of Gordon, Neb. Mr. Rich said the Justice Department prosecuted cases of pricing discrimination involving American Indians in the mid-l980s, but he specifically credited a 1992 Indian Country Today article on the Community Reinvestment Act with kindling the department's current unparalleled efforts in behalf of fair lending practice in Indian country. Comptroller of the Currency Eugene Ludwig also continued to call for change within the banking industry. The nation's top overseer of more than 3,000 federally chartered national banks visited teh Navajoland in March 1993 and offered himself as a change agent for banks seeking to make non-traditional loans to American Indians while remaining within the ``safety and soundness'' principles that undergird the bank regulatory system. Four and a half years later a number of innovative credit mechanisms are active in Navajoland. ``I think it's important to think in innovative terms,'' Mr. Ludwig said. ``Through innovation and breaking down prejudice we can really produce great results.'' The long isolation of American Indian communities from basic banking services has left many results still to be produced, he added, despite the improvements of recent years. ``The number of 1/8loan 3/8 denials indicates a great opportunity is not being fulfilled.'' Stephen Cross, OCC deputy comptroller for community and consumer policy, put the primary blame for this opportunity cost squarely on bank obliviousness to Indian Country's market potential. ``Markets fail when perceptions diverge from the reality of profits,'' he said, citing Norwest Bank's Navajo branches: all have exceeded expectations. In some banking systems, the branches in Indian Country are the most profitable branches after only two years of operation. And loans within Indian Country have increased a dramatic 16 percent in recent years, a sure indication that banks are finding it a profitable market. The Community Reinvestment Act. or CRA, can be seen as a broad attempt to perfect the financial markets when they fail to serve whole groups of people. For an audience already quite familiar with the anti-redlining law, Mr. Cross went through the outstanding regulatory changes banks will be graded on for compliance with CRA, but he discredited any notion that a magic number of loans, services or investments to low- and moderate-income clients will make for the much-coveted ``Outstanding'' CRA rating. CRA does not allocate credit, he said. instead it promotes the ``democratization of credit'' (a phrase made popular by Mr. Ludwig). Mr. Cross recommended one measure of success for a bank's CRA programs: ``motivation by profit, not compliance.'' Several other speakers provided the profit motive, none more so than Rodger Boyd. The former Navajo Nation director of economic development, now a consultant with Fortech Development Company in Chicago, said the Navajo Nation found its multiplier effect -- a way to multiply the impact of any income reaching a reservation economic system -- in housing. ``The multiplier effect really begins to kick in'' when housing goes up, he said. With need estimated at 100,000 houses in Indian Country over the next decade, according to FannieMae or the Federal National Mortgage Association, housing emerges as the single largest economic force on the horizon for many a reservation. Big-number estimates in Indian Country have always gotten the attention of government agencies and financial interests, sometimes justifiably so (casinos) and sometimes not (failed hotels, factories and other schemes). But the need for small loans in Indian Country, of the kind not normally provided by larger regional banks or often even local ones, has remained constant, at least in the experience of Rebecca Adamson. The First Nations Development Institute president began her involvement in banking issues by opposing a proposal for a national Native bank. On grounds it wouldn't be able to make or service small loans in the local community where they are needed. She sounded the same theme 16 years later: ``Small loans make a huge difference in Indian Country.'' But in a departure from the past, she also noted that banks now have incentives, under the CRA, to assist tribal communities with the development of financial infrastructure and capacity for credit. ``Use your financial expertise and be strategic,'' she said, in recommending four little-known areas to the attention of banks -- microcredit financial intermediaries, Tribal Business Information Centers, nonprofit organizations and tribal governments. The turnout of more than 350 bankers and financial specialists, tribal and government agency personnel, led to several comments in the crowd, at different points of a long day, to the effect that the conference never would have taken place five years ago, and would not have drawn a dozen people if it had. ----- ON THE INTERNET: Visit Indian Country Today on the World Wide Web at http://www.indiancountry.com/ ----- (c) 1997, Indian Country Today, Rapid City, S.D. 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