Chicago's units was less than $10,000 while the figure was only 36% in the

suburbs.

Approximately 19%, or about one out of every five Chicagoans is on

welfare1 (see Map 1). Between 1960 and 1970, the median home value (figured in

1970 dollars) in Chicago dropped by 8.2% while in the suburbs it increased by 5.2%. The City of Chicago Department of Development and Planning estimates that by 1975 the city was losing housing units at the rate of approximately 19,000 per year. (See Map 3).

It is against this backdrop showing a major urban center losing its human, housing, employment and financial resources that the increasing conflict between lenders and community groups over the question of redlining has taken place. As the debate continues, data collected as a result of new city and state disclosure laws makes it evident that lenders and particularly commercial banks -- are collecting far more deposits from inner-city residents than they are returning to those residents in the form of loans.

In addition, it is clear that although savings and loans and neighborhood banks have been the primary target of anti-redlining groups, it is for the most part in fact Chicago's large, Loop banks that have the lowest loan/deposit ratio in the neighborhoods. (See Tables I, II). The most recent disclosure data col

lected by the State indicates, for example, that not only do the five largest Loop banks have only 3.1% of their total assets in housing loans, but that in addition, 84% of those loans were made in the suburbs. (See Table III).

Suburban loans, on the

One of the main responses of lenders to community groups who push for a greater return on their deposits in the form of loans to their areas is that the risks are too high to lend in inner-city neighborhoods. other hand, are perceived by lenders as being a sound investment. We have examined the default rate of those loans made in accordance with given banks' present lending policies, and note that present assumptions about suburban loans being

low risk bear further examination.

PERCENT OF POPULATION
ON PUBLIC ASSISTANCE

(197-1975)

Prepared by Community Services and Research Corporation, Chicago.

-

A substantial portion of the $3.2 billion lost on bad loans by the total banking system in 1975 was on loans made to Real Estate Investment Trust (REIT) most of whose investment properties are located in the suburbs. In addition, none of the banks that were forced to close during 1975, and not one of the banks on the Comptroller of the Currency's "problem banks list" had a significant portion of their portfolios invested in inner-city areas.

It is important to note that even with the substantial losses suffered by the banking system last year, the profitability of banks continued to increase. According to Keefe, Bruyette and Woods, bank stock underwriters, twenty-four of the largest banks in the country representing a cross section of those institutions which have over $1 billion in assets had a combined profit increase of 8.4% in 1975. (The total losses for this group of banks, incidentally, was in excess of $1.4 billion.) The underwriters also reported that 1975 was the fifteenth consecutive year that the earnings per share of this group of banks increased.

1

Banks Profitability Is Enhanced by Public Policies

Approaching the problem of stimulating inner-city reinvestment through additional regulation, it is argued by many bankers, violates those institutions' right to pursue lending policies in a free market which will earn their investors a reasonable return and protect their depositors money. The fact is, however, that banks impressive record of profitability and safety of deposits is enhanced by public policy.

1. State and federal regulatory agencies protect the markets of banks and savings associations.

2. The interest rates which banks and savings associations can pay to depositors are controlled by the Federal government.