When Willie Lomax examined the investment record of the Highland Community Bank, he was outraged.
As executive director of the Chicago Roseland Coalition for Community Control, he deals with scores of banks and bankers, trying to lure investment into his credit-starved, mostly black, far-south-side community. From that standpoint, he says, Highland's record may have been the worst he's seen.
In 1986, the last year their full records were available for examination, only $14 million (or 17 percent) of Highland's $85 million in assets was invested in loans, according to the Woodstock Institute, a not-for-profit think tank that advises community groups on banking matters. Of $11 million the bank issued that year in commercial loans, only $1.8 million went to low-income south-side communities, despite the fact that the bank is headquartered on the south side. Worse yet, about 42 percent of its loans went outside the city, a rate substantially higher than any of its peers.
In short, Lomax surmised, Highland had turned its back to those inner-city communities that most needed investment. He had no choice but to take the case to federal regulators. There was only one problem: the Highland Bank is black.
Well, not not the bank itself, but its officers. In fact Highland is one of only four black-owned banks in Chicago. And many of its officers--including president George Brokemond and board member Charles Davis--have strong ties to the most important civic groups and organizations in the black community, particularly Operation PUSH.
"No one was really eager to get into this fight," says one observer, who asks for anonymity. "Willie has to realize what he's up against. These guys could really hurt him in the black community. A lot of us told him to hold back."
But Lomax and the coalition went ahead anyway. In April, they challenged Highland before the Federal Deposit Insurance Corporation (FDIC). Highland wants to buy the United Savings of America savings and loan facility on 119th Street in Roseland. FDIC approval of the purchase, the group stated, should be contingent on Highland's committing to offer home and commercial loans in Roseland. The challenge, heard at a public meeting here in June, has been forwarded to FDIC offices in Washington for review.
In the meantime, the coalition finds itself against the wall. They are a small community group operating out of a church on a seedy section of 110th Street. Highland Bank, on the other hand, is a well-entrenched institution, championed by such civic leaders as Jesse Jackson--a fact the bank is not likely to let Lomax forget.
"I know what people are saying," says Lomax. "People call me all the time. They say, 'Willie, pull out.' 'Willie, you bit off more than you can chew.' But I can't pull out. The bank's making this a personal thing. They act like the bourgeoisie of the black community hasn't got time for a little group like CRCCC. But this shouldn't be about personalities. It's about investment. I can't worry that the folks at Highland are black. I've got to treat them like any other bank."
Lomax's weapon is a little-known federal law called the Community Reinvestment Act, which aims to induce banks to lend money in low-income communities.
"Investment is the lifeblood of the community," says Josh Hoyt, vice-president of the Woodstock Institute. "The need for investment is color blind. Without it communities wither and die. As long as money keeps coming into a community, it can survive demographic changes."
Quite the opposite has happened in Roseland and dozens of other southand west-side neighborhoods over the last three decades. As the federal government subsidized the construction of highways and the development of relatively inexpensive suburban housing, hundreds of thousands of middie-income whites deserted the city. At the same time, poor and underskilled blacks and Hispanics were migrating here. Exacerbating the demographic changes were economic changes that closed down many of the city's high-paying industrial employers. Unemployment in Roseland soared upward of 40 percent. Suddenly many working-class residents lost their homes because they did not have the money to meet mortgage payments. Buildings collapsed for lack of maintenance, because landlords could not make repairs while charging rents their tenants could afford.
"We have a lot of boarded-up homes here, and our business strips are hurting, but I think there is still a lot of potential for banks to invest in Roseland," says Lomax, who has lived there almost all his adult life. "There are still working-class and middle-class black families here who have money to spend. Right now people go outside Roseland to shop. We need more businesses here. We need commercial and residential loans. That's why we challenge these banks on the Community Reinvestment Act; we don't want them redlining us."
The Roseland group has had some success with CRA challenges. Last year, they forced the Beverly Bank to pledge $20 million in commercial, housing, and student loans for the community. After weeks of negotiations--some of them heated--Beverly signed an agreement with the coalition in a public ceremony.
From the outset, however, the skirmish with Highland has been different. For starters, Highland's assets are not as deep as Beverly's. The Roseland group therefore asked for no dollar commitment on loans. Second, because its officers are blacks, Highland is not so vulnerable. In its battle with Beverly, CRCCC won the backing of blacks from outside Roseland. The Chicago Defender championed their cause. And Beverly's bankers, who did not want to be called racists, were eager to accommodate. But prominent blacks have exerted little or no pressure on Highland's leaders (none of whom could be reached for comment). And the bank's leaders insist that their record of contribution to the black community is beyond reproach.
"For illustration of our broad community involvement," wrote Charles Davis, in an April letter to Lomax, "Mr. Brokemond has until a few months ago served for a number of years as treasurer of Operation PUSH. Jesse Jackson will gladly attest to his service . . . Bishop Arthur Brazier will attest to the banks extension of credit to [the Woodlawn Organization, or TWO], which enables them to carry on their fine work, as well as to Mr. Brokemond's past service as a member of the Board of Directors of TWO. Rev. B. Herbert Martin, president of the Chicago Southside NAACP, will attest to [my] 25-year service as secretary of that branch and to the bank's donated support and loans to NAACP. Mr. Brokemond has performed yeoman service for this organization as Chairman of its 'Fighting Fund For Freedom' dinner on two occasions.
"Other of our Board members have also donated time as well as both personal and business funds to these and many other community organizations. Reverend [Wilbur] Daniel, our Chairman of the Board, is no stranger to most ministers on the Southside of Chicago. I am sure that Reverend Clay Evans can attest to the kinds of assistance a dedicated Black Bank can provide in time of need."
In addition, Davis wrote Lomax, the bank makes loans to "businesses to buy equipment, to motels for acquisition and remodeling, to churches for both real and personal property, to day care centers, to funeral homes, to medical clinics, to sitdown restaurants and fast food operations, as well as property owners who acquire and maintain multiple dwelling structures with more than four apartments."
Lomax counters that these claims are not as important as they sound. True, Highland has been a partner in not-for-profit housing ventures with TWO, but these are hardly projects that would not have gone through without the bank's participation. Most deals like this are heavily subsidized and insured by the federal government. If Highland had not participated, some other bank would have.
Similarly, offering loans to an entrepreneur who has rights to a McDonald's or Kentucky Fried Chicken franchise provides no additional revenues for a community. These businesses most likely will succeed, or else the fast-food corporation would not invest there. Again, most banks would be willing to underwrite these deals.
What Lomax wants is a deeper sign of commitment--a willingness to invest in everyday black working men and women, who are not backed by the feds or major corporations. These individuals, Lomax says, need bank support the most.
"Don't tell me about the loans to the churches," says Lomax. "That's nice, but what about the little people sitting in the pews? What about the ma and pas who want to make a commercial loan? They need money too."
"Highland is run by conservative bankers, and there are credit needs they won't meet," says Hoyt of the Woodstock Institute, echoing testimony he delivered at the FDIC hearing. "They park their money in national corporations. When corporations want to raise money, they sell paper; it's like a treasury bond. Highland also buys treasury bonds. These are all very safe and conservative investments."
Well, Highland's defenders say, why shouldn't they be cautious? There is a reason large white-owned banks pulled out of the inner city. It's too risky. A steelworker can't repay a mortgage if the mill closes down. Then the bank is left with a run-down house in a deteriorating community that most people are deserting.
Highland is not First National; it is a small bank with limited resources. Its commitment to black Chicago, one might argue, should not outweigh fiscal prudence. Or, as Charles Davis told the Chicago Tribune: "You know how banks fall? Bad loans. It means that you have to be an exceptionally good manager to survive in an area where the eight-year attrition rate is 50 percent."
Lomax argued his case in a closed-door negotiating session with Highland's board. "Oh, some of their directors were yelling and screaming and making a big fuss," says Lomax. "I guess they wonder who am I to challenge them. And I'm trying to tell them my demands are not that tough."
Indeed, CRCCC's demands are not binding and they require no specific dollar commitment.
"We're asking that they make residential mortgages out of the Roseland branch, if it opens," says Lomax. "We want them to employ a commercial loan officer there, and to apply to participate in below-market-interest mortgage programs sponsored by the federal government. And we want them to meet with us [CRCCC] every other month to review their record."
Davis, in his letter, acknowledged that the bank was ready to meet most of those demands--except the last one.
"Your apparent intent coincides with our past and present policies," Davis wrote in his letter to Lomax. "We think that such broad goals as you and we have can better be addressed, however, by consortiums of community organizations, not-for-profit service agencies, churches, government agencies, business and financial institutions."
So Lomax has modified his last request. Under the new proposal, the coalition would not require a public agreement-signing ceremony, as they did with Beverly Bank. And Highland would be required to meet periodically not with CRCCC alone, but with a panel representing churches and other Roseland organizations as well. So far the bank has not responded to Lomax's amended proposal.
"I think they want to come into Roseland so they can make franchise deals and other safe investments," says Lomax. "They keep saying that if they don't come here we'll be stuck with a vacant storefront on 119th Street. But, I say we might get another business to move there--some kind of fast-food restaurant or a drugstore. I'd rather have a bank, 'cause they can then make loans to the community, but if the bank ignores our needs, what's the difference?"
Art accompanying story in printed newspaper (not available in this archive): photo/Bruce Powell.