I am pleased to respond to your letter of November 29 in which you ask certain follow-up questions in connection with my testimony at your recent oversight hearings on Regulations B and C.

You inquire whether the Board is considering the development of case studies to assist examiners in finding possible discriminatory practices by lenders. Such studies have been prepared in a joint effort with the Comptroller of the Currency. I am enclosing a set of the case studies and other materials that have been used in two special training sessions on consumer regulations that the Board has conducted recently for bank examiners.

You also request certain clarifications of the Board's response to a question in your letter of November 8 regarding "informal conferences" between examiners and bank management. Such conferences are simply meetings at which matters of interest or concern to either party may be discussed. The meetings are most often held in conjunction with a scheduled examination, but they may be called at any time they are felt to be desirable by an examiner or bank management.

An informal meeting might be called, for example, if a bank's response to a civil rights questionnaire of the type that was appended to my testimony indicated a lack of reasonable familiarity with the law or the possibility of some discriminatory lending practices by the bank. As you suggest, these conferences are used to instruct banks or to request changes in certain practices in order to "prevent" discrimination in the future. Our analysis of

The Honorable William Proxmire

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instances of discrimination. Supervisory follow-up took the form of interim reports from bank management and verification of the fulfillment of management's commitments at succeeding examinations.

In connection with Regulation B you ask whether it would be helpful to require lenders to tabulate the data collected on race, sex, marital status, and age. While the Board has the principal rule-writing authority under the Act, responsibility for enforcement is divided among twelve regulatory agencies. The Board believes that each regulatory agency ought to determine how to use the data collected by the institutions under its jurisdiction. Uniform collection and examination techniques may eventually emerge, but we do not think that collection requirements should be imposed by the Board at this time.

In this connection, I would also point out that Regulation B applies to all creditors, not merely to depository institutions. While tabulation might be useful at depository institutions which are examined regularly by the financial regulatory agencies, other creditors ordinarily are not examined on a regular basis. Thus it seems unnecessary to impose the burden of tabulating data on all creditors. In the event of a lawsuit or an enforcement action against a particular creditor, such data would be available in accordance with the recordkeeping requirements of the regulation and could be tabulated at that time.

Finally, you ask whether it would be preferable to spell out in precise terms what practices are prima facie unlawful under the effects test. The Board has given serious consideration to a "laundry list" approach. The problem with such an approach is that credit criteria or standards which might be legal when used by one creditor might be illegal if used by another creditor. Furthermore, any attempt to furnish a list would be likely to omit important factors. We believe it is better for all creditors to reexamine all of their credit criteria and attempt to remove every illegally discriminatory factor.

I hope this information will be helpful to you. Please let me know if I can be of further assistance.

Sincerely,

Philip C. Jackson, Jr.

Enclosure

The CHAIRMAN. Thank you very much, Governor Jackson.
Mr. Marston, go ahead, sir.

STATEMENT OF GARTH MARSTON, ACTING CHAIRMAN, FEDERAL
HOME LOAN BANK BOARD

Mr. MARSTON. Thank you.

Mr. Chairman, Senator Garn, you have asked us to comment on the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act of 1975 and our activities regarding compliance with the fair housing laws. As I indicated earlier, we handed you a letter on Friday night with more detail on your questions. I'd like to give you a brief opening statement to highlight our response.

First, as to the ECOA, as Governor Jackson indicated, these regulations are being promulgated by the Fed. We have commented to them. We sent you a copy of our letter to Chairman Burns. It is our belief that a simple-underlined-simple notation requirement should enhance our examination abilities. The Board believes this and our examination staff believes this. We have improved substantially our staff seminars that we give on a continuing basis to our examiners. Mr. Chairman, we invite you, any member of the committee or any member of any of your staffs to attend those seminars.

We are looking for constructive suggestions. As you may know, we have had somebody from the Justice Department spend time with us. We are looking for constructive help any place we can get it.

Further, Mr. Chairman, if the Fed for some reason does not promulgate the regulations-we believe that they will-and if for some reason HUD doesn't, it is our feeling at the moment that we probably will promulgate some regulations on our own to affect the people that we supervise.

Second, regarding the Home Mortgage Disclosure Act, the compliance so far appears to be good. There have been a small number of complaints. We investigated the 7 complaints out of the some 30 or 32 that were handed to us by an organization. Of those, it turned out that six were in substantial compliance. The seventh had a computer breakdown and as soon as their figures were available they made them available. It was their intent to comply to the law.

We have a couple now in the mill that we are investigating. Further, I want to tell you that I have alerted our principal supervisory agents and the Bank chairman, who are appointed directors, as to the importance of this and asked them to be especially alert in their districts for complaints. Our examiners will follow through and we are sure that interested citizens and the media will, as usual, be the best regulators in this regard.

Third, as to the aggregating of the data for the 30-largest SMSA's, we have some questions, as your staff knows, as to the costs, as to the deadline imposed, as to the problems that Governor Jackson indicated, as to the comparability of the data, and the 4 exception states which have about 11 of the 30 SMSA's and about 50 percent of the volume. So we have some questions as to the use or the value of the data when it's completed.

However, we continue to work with the FDIC and members of your

responding. After all, Senator, we wouldn't want to qualify for one of your "golden fleece" awards if we didn't do a proper job in this regard. I'd just like to take 2 minutes to read part of the statement to focus a little bit more on this aspect of it.

Representatives of the Board and the FDIC have met with members of the committee's staff to discuss the feasibility and costs involved in complying with your request that the mortgage data for the 30-largest SMSA's be tabulated. However, and as we indicated in our letter, our preliminary review has disclosed serious problems as a result of an apparent lack of standardization in the reporting systems of the various institutions. We, of course, intend to keep you apprised of our work in this area.

I would like to raise one other point concerning collection, at the Federal level, of Home Mortgage Disclosure Act data. The Board believes that utilization of the data reported pursuant to the act should not be focused on studies conducted at the national level. Rather, the information can best be put to work at the local level. One possible use of this material is for a local government to tabulate the data and use this compilation as a tool in its efforts to preserve and restore urban neighborhoods. Certainly, local officials are in the best position to assess the presence or absence of mortgage lending activity as a valid indicator of a neighborhood's stability. Moreover, local officials are in the best position to concentrate the resources necessary to arrest and reverse the process of decline in its incipient stages. The Board's experience with neighborhood housing services indicates that involvement on the part of the local government, the lenders, and the neighborhood residents is the key ingredient in the revitalization process. And the earlier such involvement begins, the better the chances that decline may be halted.

To summarize this point, it is the Board's belief that the mortgage disclosure data can be employed far more productively at the local level than at the national level. Further, use of this information at the local level should begin now and not await action at the national level. Finally, at the Board we have cooperated, and will continue to cooperate, with local officials who seek solutions to urban problems-be those solutions in the form of our NHS program, an innovative use of the Home Mortgage Disclosure Act data, or an entirely different concept.

So to summarize, Mr. Chairman, we continue to take our enforcement responsibilities seriously. As I indicated, we have improved our examiner training program. I might add there that we have not increased the number of people that we have at the Board since about 1970 with two exceptions, and those two exceptions were to add field examiners. We are just going through the budget process with our individual banks. and it was interesting for me to see that the single greatest increase in costs was in the area of supervision because with the increased examinations we know that we are going to have to work with the associations to be sure they are doing the right thing in their particular areas.

Again, I urge you or members of your staff or any member of the committee or their staffs to attend one of these seminars to observe and to help us do better.

Mr. Chairman, that concludes my remarks.

The CHAIRMAN. Thank you very much, Mr. Marston.

I might just follow up with what you said in your remarks. Your letter pointed to problems of comparability of complying and analyzing the data. Wouldn't it be useful to mandate standardized reporting forms? Why not do that? Wouldn't that solve your problem?

Mr. MARSTON. Well, it would solve this aspect of the problem, but, Senator, you have been pretty big on States rights and I think this was in the act to let the States go ahead if they had a comparable or more. proconsumer form.

The CHAIRMAN. How can you solve it if you have 50 different approaches?

Mr. MARSTON. I don't know. You could do it one of two ways.

The CHAIRMAN. Would there be much objection on the part of the States? Would they regard that as fundamentally violative of States rights?

Mr. MARSTON. I'd say it would be from a political standpoint får more difficult to take it away once having given it to them. We find that the States are pretty jealous of their prerogatives, either real or perceived.

The CHAIRMAN. Even with respect to the standardized form? That's not after all the kind of right that they usually fight and die over. Mr. MARSTON. It would certainly help solve the problem that we are talking about and that is not to say that the problem could not be solved if you wanted to spend enough money to do it. We could do the collation and the changes. On a number of these answers I'm going to have to answer for the record. Do you have any idea how the States would react?

Mr. JACKSON. We have received communications from several States in the process of considering exemptions, Mr. Chairman, that would indicate that they would like very much to retain this prerogative over the State chartered institutions located therein.

The CHAIRMAN. Including others having comparable standardized forms? We're talking about mandating standardized reporting forms. Mr. JACKSON. The communications that I have seen from-I can think of one State in particular-would indicate they would not want standardized reporting forms because the requirements that that State has presently in effect, while they may or may not be substantially similar-and that's one of the judgments that the Board is going to have to make very shortly as I mentioned in the testimony-they are not indentical.

The CHAIRMAN. Let me get into something else very fundamental, The answer to the first question I asked you in connection with these hearings in my letter of November 8, you say the Board issued on November 3, for public comment, a revision of its Equal Credit Opportunity regulation and that contained provisions that would require creditors making certain residential loans and request information regarding the race and national origins, sex and marital status of your applicants. As I understand it, those comments would be received until January.

Mr. JACKSON. I believe the deadline for comments under the present proposal is December 3.

The CHAIRMAN. December 3?