Redlining

In 1976, Seattle City Council took a stand against redlining, a discriminatory practice targeted at African-Americans and others of color, by which banks, insurance companies, and other institutions, refused or limited loans, mortgages, and insurance within specific geographic areas. Redlining also included the practice of banks not reinvesting funds they received from low income neighborhoods back into those communities. A six-month study by the Central Seattle Community Council Federation released in July 1975, "Redlining and Disinvestment in Central Seattle," examined 1,150 property transactions in Seattle. The study found that eight major banking institutions did not make more than two loans each in the Central Area and Rainier Valley from 1970 to 1974. Prompted by this report, the Mayor established a Reinvestment Task Force to propose policies to eliminate redlining, or disinvestment, as it was also called.

The final report from community members of the Mayor's Reinvestment Task Force was completed on June 3, 1976. In August, Councilmembers Paul Kraabel and John Miller, together with Mayor Wes Uhlman, announced a series of meetings to discuss proposed anti-redlining legislation. Public hearings and meetings of the Planning and Urban Development Committee were held during the fall of 1976, and the Public Reinvestment Board was established by Ordinance 105987 that November to help reverse discriminatory practices in lending.

At the September 1, 1976, meeting of the Planning and Urban Development Committee, several people spoke about the proposed Public Reinvestment Board.

Karen Morgan, a member of the Mayor's Reinvestment Task Force, spoke in favor of the ordinance establishing the Public Reinvestment Board.

Karen Morgan: My name is Karen Morgan and I was a member of the task force representing the Wallingford community. I'm not going to make comment on the Lender's Review Board at this time and the process of developing that; I'm simply going to confine my comments to the suggested ordinance which is before you to establish the public review board.

First of all, I'd like to say that having worked with this problem for over nine months, I have been impressed over and over with the fact that it is not a simple problem and it is not a problem that has more or less gone away now, because certain banks have decided that they will try harder to make loans. I found it somewhat distressing to have that implied. I think the public testimony we received on the task force runs counter to that, and the contact I've had with citizens since then also runs counter to that assumption.

Edward Lange, from the firm Davis, Wright, Todd, Rise & Jones, represented lenders and the Washington Bankers Association. Instead of an ordinance, he proposed a resolution to create a Civic Preservation and Revitalization Review Board with a broader mandate. Councilmember Kraabel questioned him about the scope of the board he put forth.

Councilmember Kraabel: How does it work without a common set of standards? Doesn't that permit just enormous flexibility?

Edward Lange: The problem, or part of the problem, is the agreement to a common set of standards. It is anti-trust. Frankly, that is one of the very serious problems if we do agree to common sets of standards in that area... Now measuring performance, I think you are going to be able to measure performance by the number of complaints received and how they're disposed of...

Councilmember Kraabel: But the standards seem general. I don't understand anti-trust law, you're getting in way over my head.

Edward Lange: You're not alone there.

Councilmember Kraabel: I'm reading the standards: "Participating lending institutions will instruct appraisers not to provide information on racial, ethnic and geographic composition of neighborhood residents." If they all abide by that, is that anti-trust?

Edward Lange: I don't think we can pick out one and try to focus on it... There's something else you have to keep in mind. And that's that the lending process is a judgmental process. You can't plug application A into a machine and get out yes or no. The machine that does it is a human machine and it's a judgmental process. And that's an imperfect process at best. And we're trying. I think an important thing that's come out of the disinvestment task force and out of the lenders' review process is that lenders are developing more objective lending policies and standards, appraisal standards...but they cannot surrender their judgmental elements completely.

Councilmember Kraabel: No, it is very subjective, and because it is subjective, cooperation is I think very necessary... I guess it seems to me a bit of a contradiction to say that lenders are committed to the Review Board and to the standards.. It is a verbal agreement.

Edward Lange: It will be more than verbal.

Nick Licata, Secretary for the Coalition on Redlining, spoke near the end of the meeting.

Nick Licata: I'm Nicholas Licata, current Secretary for the Coalition on Redlining. It's a coalition of about thirteen community groups that have been concerned with the issue of investing and housing stock in Seattle. I was originally going to limit my comments to the draft on the Review Board that you have before you, but after sitting here for two and a half hours and having heard quite a few interesting and worthwhile comments, I'd like to speak to at least a few of them.

I think right now one of the basic problems Seattle faces is a lack of public confidence in the ability of the City Council, the City government, to deal with the issue of redlining, and its ability perhaps to save the housing stock in Seattle. I think that currently the city is on the right track, and has been in establishing the Reinvestment Task Force, and in taking under consideration the ordinances you have before you. I think some of the mistakes made in the past have been too much secrecy. I think that the processes in the past have not been that much open. The Mayor had met with about three or four community groups, but in the negotiations they were really left out, and consequently we really had to rely on the good faith of the bankers and the Mayor in the dealings. So that, right now, I would not like to see that process continue. And there's letters from banks complaining about the legality of the agreement they have to sign with the lender's review board. I think it's important to take a look at what banks are sending those letters and what is the content of those letters.

I think also that there needs to be some openness as to which are the regulatory agencies that are complaining about the possible restrictions that may be placed on the banks with regards to the agreement that has to be signed. I'm not an attorney, I'm not that familiar with anti-trust laws, although I do have an understanding of what I consider they're meant to be. And my understanding is that anti-trust laws basically deal with trying to stop corporations from forming monopolies over certain portions of the market. And the agreement that we're asking the bankers to sign is not an agreement to establish a monopoly, or commonality between all the banks and all their common rates. What we're asking is a commonality within each bank, each bank using whatever ratios they want to establish...so I don't think that would fall within the definition of an anti-trust suit or a question of establishing a monopoly. I think that, or the Coalition believes that the most effective way that the City can take a very open stand in solving the redlining issue is by establishing a public review board which would be visible.

Listen to the entire meeting in Digital Collections. Related documents include the Draft and Final Report of the Mayor's Reinvestment Task Force. Citation: Planning and Urban Development Committee Meeting, September 1, 1976. Event ID 3621, Seattle City Council Legislative Department Audio Recordings, 4601-03.