Bankrupting Harlem

Community groups in New York City charge that a proposed merger of two of Puerto Rico's largest banks will encourage the banks to continue a policy of providing insufficient resources to their capital-starved service areas in Manhattan, the Bronx, Brooklyn and Queens. On August 7, 1990, East Harlem's Community Coalition for Fair Banking filed a challenge August 7 with the Federal Reserve Board attempting to block the merger of Banco Popular and Banco de Poncé on the grounds that neither bank offers substantial housing or small business loans in their moderate to low income service areas.

Legal Aid attorney Lori Keitz, who represents the Coalition, says "Banco do Poncé tells prospective applicants that they don't do housing loans." And the coalition discovered that, of over $200 million which Banco Popular had on deposit in 1987 and 1988, it loaned only $2.6 and $2.0 million respectively, mostly in neighborhoods where there are no Banco Popular branches. Most of the branches are located in moderate to low income Puerto Rican neighborhoods.

Keitz points out that the two banks "consider Puerto Rico their first priority," and offer loans all over the island. "What they are doing is taking New Yorkers' deposits and lending them in Puerto Rico," she says.

The CRA states that a bank's capital must be made available in all of its service areas. To demonstrate compliance, the Act requires that banks applying for mergers submit meticulous records from their investment portfolio, dividing their service areas by census tract.

The Coalition's project director, Jasmine Hopper, says that Banco de Poncé listed the entire New York metropolitan area as its service area. Such information "is useless in determining their reinvestment record," she says. "It means they can be investing in [affluent] suburbs and 'redlining' low and moderate income areas." Redlining involves banks discriminatorily depriving certain communities access to bank loans. Another deficiency in the Poncé/Popular application is a result of CRA's limited reporting requirements, explains Hopper. The act does not require banks to submit records for commercial and business loans. Without these, "they can say they make loans to small businesses in their service area to rationalize a lack of equitable investment in home mortgages."

Hopper helped found the Coalition in 1987 in response to an exodus of banks from East Harlem. In 1987, Chemical Bank left the area. That same year, the Coalition persuaded Chase Manhattan to stay. Presently, there are seven bank branches in East Harlem, which, according to a 1988 census, has a population of 108,513 people.

"In wealthier neighborhoods there's a bank branch on every corner. They practically push their services on people. In East Harlem, people are made to grovel for services," Hopper says. "What banks are about is making money, and to do that they have to market their product. By abandoning East Harlem, they are saying that this community is not worth marketing their products to."

Hopper says that the absence of bank branches in East Harlem costs the community jobs and harms small businesses that do not have the benefit of nearby financial institutions or the capital to make their operations grow.

"When a community is physically or financially abandoned by capital institutions, and there is a lack of money for rehabilitating homes and developing housing, you can observe an increase in homelessness and families doubling up," she states. "Dozens of businesses have left the East Harlem area since 1980. People have left and buildings are deteriorating." In neighborhoods that are redlined, she adds, "drug traffic becomes the major employment opportunity."

New York Federal Reserve Bank spokesman Bart Sotnick explains that the CRA is intended to make financial institutions "treat the low and moderate income members of their communities as they would any other market." According to Sotnick, when considering a merger challenge on CRA grounds, the Federal Reserve reviews several performance categories, including the ascertainment of community credit needs, marketing and types of credit extended; geographic distribution and record of opening and closing offices; discrimination and other illegal credit practices; and community development. Sotnick claims that "there haven't been a hell of a lot" of successful challenges made since CRA was passed by Congress in 1977, but most challenges are withdrawn after community groups extract concessions.

One successful challenge against an application by Continental Bank Corporation of Chicago to acquire a small out of state bank, however, describes credit practices similar to those of Popular and Poncé. The level of participation of a Continental subsidiary, Continental Bank N.A., in community development and redevelopment was found "unsatisfactory" by the Fed's Board of Governors. "The bank made no significant effort to ascertain the credit needs of its communities or advertise its products to the community," according to the April 1989 decision.

Banco Popular and Banco de Poncé representatives were not available to comment on the Community Coalition for Fair Banking's challenge. But the two banks have responded to the Coalition's efforts.

In early September, an entourage of Popular and Poncé executives veered off the FDR Drive and pulled into East Harlem, parking their black Lincolns against the spartan backdrop of East 106th Street. The bankers were attending a meeting they had scheduled to try to persuade the Coalition to withdraw its challenge, but they have yet to make the substantial commitment of capital necessary to appease the group.

The coalition is demanding that the banks provide: reduced rate financing to construct and rehabilitate a certain number of units in the community within the next three years; construction and long-term permanent financing; contributions to the East Harlem revolving loan fund for low and moderate income housing development and rehabilitation; an automatic teller machine (ATM) accessible 24 hours per day; contributions to housing and small business loan packaging agencies; a $500,000 deposit base for a proposed credit union with flexible underwriting criteria; bridge loans for non-profit organizations to cover delays in federal and state funding grants; and investment in the East Harlem Industrial Incubator program.

The coalition hopes that the banks will adopt enough of the investment plan to warrant the withdrawal of its challenge. Hopper thinks the chances are good. If not, the challenge threatens to cause a long and expensive delay to the merger.

-Matthezo Retss

Slamming the World Bank and IMF

Over 170 activists in non-governmental organizations (NGOs) from 53 countries and six continents came together in late September in Washington, D.C. to denounce the policies of the World Bank and the International Monetary Fund (IMF). Meeting concurrently with the World Bank/IMF annual meetings, the People's Network for Eco Development sharply criticized the social and environmental impacts of Bank and IMF programs and mapped out strategies to counter the Bank and IMFs agenda.

Activists blasted the Bank and the Fund's structural adjustment policies, which force governments to cut back social programs, devalue currencies and privatize state-owned enterprises, for devastating Third World economies and exacerbating the suffering of the poor. "Everywhere on the ground, people are saying [to the Bank and IMF], 'take your money back home,"' said Vandana Shiva of the Research Institute for Natural Resource Policy in India. Future historians will "record that the Bank cares about nothing beyond increasing its own power," stated Shiva. "The Bank cares nothing about whether people live or die."

Joan French of the Caribbean Association for Feminist Research and Action focused on the effect of structural adjustment policies on women. "Women are central to World Bank and IMF policies," she said. When schools and hospitals are closed as a result of structural adjustment policies, "it is women who take up the slack.... [The Bank and IMF] depend on the unpaid labor of women."

Leonar Briones of the Philippines Freedom From Debt Coalition explained how the privatization of government enterprises, promoted by the Bank and Fund, furthers foreign dominance in Third World countries. With the World Bank's agreement, she said, the Philippines is supposed to complete the privatization of government entities in five years. But, she asked, "who [dominates] the private sector in the Philippines?" The answer: "Foreign interests. So privatization [leads to] the entrenchment of elites and the expansion of foreign control."

The activists also targeted the projects funded by the World Bank, which have had disastrous effects on the environment and entire communities. Environmentalists focused on the Sardar Sarovar Project, a dam project on India's Narmada River, as an example of the effects of World Bank-sponsored development ventures. The Sardar Sarovar Project, just one part of a larger effort in the Narmada Valley, will force the relocation of approximately 100,000 people and submerge vast tracts of fertile farmland and forests.

While the NGOs from the industrialized countries and the Third World offered similar analyses of the problems with Bank and Fund policies, some tension arose between the Northern and Southern NGOs. On the second day of the three day conference, Third World participants met by themselves to discuss their experience and strategies to combat the Bank and the IMF.

Third World activists charged that many Northern environmentalists ignore the fact that people are hurt by the World Bank, the IMF and the international debt crisis. "It is not only the environment which pays for debt, it is people," stated Briones.

Northern environmental NGOs have "a tendency to discuss the environment in terms of 'natural resource management,"' said Uganda's Charles Abugre, and thus ignore the interests of the people who live in the environment they want to protect. Harry Sakulas of the Way Ecology Institute in Papua New Guinea identified Conservation International and the World Wildlife Fund as two groups guilty of adopting a resource management approach. He said they have worked with the much criticized World Bank-sponsored Tropical Forest Action Plan to develop a forestry management plan for Papua New Guinea without consulting with Papua New Guineans.

Many participants found the airing of such grievances constructive. Doug Hellinger of the Development Group for Alternative Priorities said that "groups in the South helped groups in the North see that the economic policies being pushed by the [IMF and World Bank] are the underlying causes of social demise and environmental degradation."

Hellinger says the NGO campaign against the policies of the World Bank and IMF "is much more comprehensive and sophisticated" than it was a few years ago, and he expects that "over time a more coordinated and aggressive campaign will emerge to not only push these institutions, but to put forward an alternative [development model] emerging from the ground" in Third World countries.

-Robert Weissman