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by Michael Vizcarra/PoorNewsNetwork Community Journalist
Redlining. I had never heard of this term before I received this
assignment to write an article regarding the practice of redlining in San
Francisco and the Bay Area, even though as a Filipino-American, my community has experienced this type of economic profiling for many years.
Broadly defined, racial redlining is the direct refusal of banks and lenders to lend money in minority and low-income neighborhoods. It is the practice where banks and lenders figuratively draw a red line around communities of color and low-income neighborhoods and refuse to make loans available inside the red lined area. Redlining is practiced by all banks and is against the law.
The Community Reinvestment Act was enacted by Congress in 1977
and is intended to “encourage depository institutions to help meet the
credit needs of the communities in which they operate, including low- and
moderate income neighborhoods, consistent with safe and sound banking
operations.” (www.ffiec.gov/cra/history.htm
) But even after searching through
this website I did not find any details as to the criteria the four federal
bank supervisory agencies, the Office of the Controller of the Currency
(OCC), Board of Governors of the Federal Reserve System (FRB), Office of
Thrift Supervision, and Federal Deposit Insurance Corporation (FDIC) used to
rate banks in their database.//www.ffiec.gov/cra/history.htm>
What is disturbing to note is the ratings these agencies gave to
banks here in the Bay Area regarding their fair lending practices as
described by the Community Reinvestment Act to low- and moderate-income
families. Bank of America, who the city of San Francisco banks with,
received an “Outstanding” rating, despite Bank of America’s horrific lending
practices. Bay View Bank received a “Satisfactory” rating. This data might
look good on paper and to the casual observer, but this does not reflect
what is really happening to everyday people of low-income who are in the
day-to-day struggle. For us, the reality is much different. Also, there
are ways for banks to get around the parameters set by the CRA. While Bay
View Bank may have received that “Satisfactory” rating, in reality they have
a redlining policy that does not allow them to make business loans of less
than $500,000. In low-income neighborhoods, asking for a loan of that
amount would be ridiculous. Most stores and businesses in these
neighborhoods would not be able to borrow that much money nor would they
want to.
Banks can also relocate to another part of a city as a way to get around the
CRA. A few years ago, Wells Fargo Bank moved out of their Bay View/Hunter’s
Point location taking with it 20 million dollars in assets to an affluent
downtown location. The main depositors were senior citizens and homeowners
in the Bay View/Hunter’s Point district with a steady flow of income that
not only relied on the bank’s location for its convenience but also for its
personal/human customer service. But this did not matter to Wells Fargo
Bank. As a result of this move, Safeway, on Williams off 3rd Street, also
moved out, which left a void in the community. This leads to a problem
called “retail leakage” where very few of the industries within a
neighborhood consist of retail good. Thus, basic needs such as food,
supplies and clothing are not available since businesses go elsewhere. But
Bank of America, Wells Fargo, and Bay View Bank are indifferent to
merchants. Small businesses in low-income neighborhoods cannot sustain
themselves when banks practice racial redlining.
Such is the case with Willie Ratcliff and the San Francisco Bay View
Newspaper, a Bay View Bank customer for many years. He and his newspaper
were declined a line of credit for $50,000 to cover expenses while they
waited for money from advertisements. He was given a $5,000 overdraft
protection while the paperwork went through. But nothing happened for
several months. The San Francisco Bay View Newspaper almost went out of
business two weeks ago had it not been for donations and private loans from
the community. Bay View Bank did not do anything for its community or for
Willie Ratcliff. All they did was raise his overdraft protection another
$5,000. That’s all.
I spoke with Kevin Williams, Senior Contracts Compliance Officer
for Human Rights Committee for the city of San Francisco. Mr. Williams is
not new to racial redlining. He has worked many years for the city fighting
for equal lending practices for minorities and people of low-income. “San
Francisco is diverse, cultural, and has many different lifestyles, but it is
very conservative in regards to lending,” he says, “and poor neighborhoods
are the targets.” There are three criteria you must meet known as the 3
C’s: credit, collateral and character. Most small businesses
(predominantly African-Americans) are denied loans because they are
considered a high risk for not meeting all three criteria. One negative
credit “glitch” will get you denied, Williams says.
Williams was also a co-founder of the former Greenlining Coalition. This
coalition, made up of a diverse group of people (African-Americans, Latinos,
Asians, Women’s groups), worked to agitate banks into recognizing their
illegal practice of racial redlining. Their grassroots tactics of
protesting made a difference and had some small success. They would file
documents opposing bank mergers and raise issues of minority inclusion in
lending decisions (since there were no people of color who had
decision-making power within the banking system; the people who had that
power were predominantly white males). Some banks agreed to “broad”
greenlining agreements in which they had to make a long-term commitment to
invest in minority communities. But in reality, the money would not reach
the small businesses that needed the chance.
Racial redlining has a deeper effect than just affecting businesses. It
contributes to joblessness and to homelessness. Redlining stops businesses
owned by people of color from hiring employees. Thus, young folks do not get
the chance to work. Also, in direct economic terms, racial redlining reduces
housing finance options for borrowers in minority neighborhoods and weakens
competition in the mortgage market. This often results in higher mortgage
costs and less favorable mortgage loan terms. More subtly, racial redlining
discourages minorities from pursuing home ownership opportunities and in the
broadest sense further entrenches the debilitating sociological effects of
racial discrimination
(plsc.uark.edu/plsc3253/Classnotes/racial_redlining.htm).
This is the first in a PNN/Bayview series on racial redlining. If you have
experienced or have a story you would like to report regarding racial redlining please contact us at POOR Magazine (415) 863-6306
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