At the beginning of this year, relations between the Beverly Bank and the blacks who live in its South Side service area were bad and headed for worse. Black leaders charged that the bank had, almost literally, turned its back on the minority neighborhoods to the north and east and directed its attention-and money-toward the white suburbs to the southwest.
It was happy to accept deposits from black customers, but home loans were difficult to obtain, the leaders charged.
”Beverly Bank must be boycotted,” said one flyer passed out during a demonstration last February. ”We shall not be disrespected any longer.”
But last week, black community leaders and white bank officers crowded into a boardroom at the bank`s headquarters, 1357 W. 103d St., for a veritable love feast.
After exchanging compliments, A. Robert Teresko, president of the bank, and Willie Lomax, president of the Chicago Roseland Coalition for Community Control, signed an agreement that called for the bank to offer $20 million in market-rate mortgages, home improvement loans and other services in low-income neighborhoods on the South Side over the next five years.
The bank also agreed to open an automatic teller machine in the predominantly black Roseland community and to set up a program under which welfare recipients could cash their benefit checks and pay utility bills for $2 a month, a bargain compared with fees charged by currency exchanges.
This was a sharp change of direction for a bank that had recently shuttered a branch in the predominantly black Washington Heights neighborhood while opening new offices in the largely white suburbs of Homewood and Orland Park.
What caused the change? Some people call it blackmail; others call it public pressure. It`s a tactic that has freed up an estimated $5 billion in low- and moderate-income loan commitments and other concessions around the nation in the last five years, including more than $150 million in Chicago.
It works like this:
The community groups wait until a bank tries to take some action that requires the permission of federal regulators: buying another bank, perhaps, or opening a branch or forming a holding company.
The groups then threaten to file a complaint under the federal Community Reinvestment Act of 1977, a vaguely-worded law that requires financial institutions ”to help meet the credit needs of the local communities in which they are chartered.”
Community activists admit that banks often would stand a good chance of winning their cases in the laissez faire atmosphere of the Reagan
administration. In many cases, however, banks prefer to work out an agreement with the community groups rather than risk delay and bad publicity.
The Beverly Bank had asked the Federal Deposit Insurance Corp. for permission to open a branch in suburban Oak Lawn. The application was immediately flagged by the Woodstock Institute, a local not-for-profit organization that promotes private investment in rundown city neighborhoods.
That was last June. By August, the Woodstock group had prepared a detailed report charging that the Beverly Bank invests ”almost no money . . . in its low-income communities.” By mid-September, the $20 million loan agreement had been hammered out by representatives of Woodstock, the bank, the Chicago Roseland Coalition and the Legal Assistance Foundation of Chicago. In exchange for the loan agreement, the bank`s opponents agreed to drop their opposition to the Oak Lawn branch.
The Beverly victory was the second in two months for the Woodstock Institute. Last month it pressured the Austin Bank of Chicago, 5645 W. Lake St., into offering $6 million in home loans in the predominantly black Austin neighborhood on the West Side and depositing $100,000 in a fledgling community-run credit union.
In this case, Woodstock intervened when new owners were seeking federal permission to purchase the bank, which, like the Beverly Bank, had strained relations with its community.
Last spring, Woodstock stepped in when Drovers Bank of Chicago, 47th Street and Ashland Avenue, sought to open a downtown branch. Drovers agreed to continue lending money in its Back of the Yards neighborhood and to maintain close ties with community organizations.
But Woodstock`s biggest haul occurred in the spring of 1984 when, within a few weeks, it extracted inner-city loan commitments of $100 million from First National Bank of Chicago, $35 million from Harris Trust & Savings Bank and $18 million from Northern Trust Co. Woodstock was able to intervene because the holding companies that owned First National and Northern were buying new banks, while Harris was changing ownership.
Now, three years later, community investment groups are seeing something they never thought they`d see: The supply of available loan money for low- and moderate-income housing in decaying areas of the city actually exceeds the demand.
First National has lent about $27.5 million so far, most of it for renovating multifamily buildings, and Harris about $17 million, according to officers of the two banks. (Northern could not provide a figure.) The bankers say they are continually seeking qualified borrowers for the market-rate loans, and First National plans to begin touting them in an aggressive advertising campaign.
Bill Foster, executive director of the Chicago Rehab Network, which screens applicants for the loans, said the main reason for the lagging demand is the virtual elimination of federal housing subsidies under the Reagan administration.
”It`s next to impossible for low-income people to qualify for a bank loan without some sort of government grant to begin with,” he said. ”The numbers just don`t work.
”But I still think the program has been a success,” he said. ”We have placed loans in some of the lowest-income locations in the entire city. They`ve been used to rehabilitate property and put very low-income people into decent, affordable housing.”
And, Foster said, the program has eliminated redlining, the denying of credit to low-income or racially changing neighborhoods. ”These banks will make loans anywhere in Chicago,” he said. ”That doesn`t mean there aren`t financial requirements, but they`re not denying credit on the basis of geography.”
The banks also have discovered they can make money on housing loans in the city and that the default rate is as low as, or lower than, the rate on their other loans.
Which makes one wonder why they had to be pressured into making the loans.
”It`s just a matter of the institutions defining what business they preferred to be in,” said Terry Young, assistant vice president of First National and manager of its neighborhood lending program. ”A lot of them just were never in the business” of inner-city loans.
Elspeth Revere, president of the Woodstock Institute, put it less delicately.
”A lot of bankers have lost touch with the local market,” she observed. ”What do they know about Chicago? They come here from out of town, live in the suburbs and read a newspaper while they`re on the commuter train passing through the city.
”Our job is to acquaint them with Chicago and its needs.”
