NEWSWEEK: Was overseeing Inner-city lending an assignment you wanted?

LINSEY: When Chairman [Alan] Greenspan gave me the assignment, I said, “Do I have a choice?” and he said, “No.”

Is lending discrimination really a problem?

The amount of discrimination that’s occurring is probably quite small. If you compare the amount of home mortgage lending to some kind of crude base of what the applicant pool might be, families who earn over $25,000, you find that there’s almost no difference in the proportion [of blacks, whites and Hispanics] that have gotten mortgages. The extent of credit-card use and the balances outstanding have become very equal among races, income groups, ethnic groups.

So, how successful is the CRA?

It’s taken a while. What’s happened in the last five years is this explosion in partnerships between [banks] and community groups that have been cornerstones of rapid expansion of mortgage lending to low-and moderate-income people.

Are there aspects of the banking business where you see discrimination?

I don’t know if it’s discrimination . . . It’s very hard for retail development to get going if there’s not a bank branch around. It’s not clear the process we’ve set up actually encourages that. The surest way to discourage banks from opening branches is to penalize them when they close branches. Unfortunately, a lot of the CRA protests have been on branch closings. Another challenge is the last wave of public concern, which had to do with lending quality. I remember one particular regulation. It would have required minimum down payments for all types of loans, and in the case of mortgages it was 20 percent. Very liberal banking committees passed that bill. The effect, had it actually gone into regulation, would have been to eliminate the low- and moderate-income housing industry. It’s very tough to get a 20 percent down payment on a home. So I don’t think there’s a lot of intentional discrimination. I think there’s a lot of unintended consequences of some well-intended actions.

Do bank presidents actually pay attention to this stuff?

Oh my gosh, yes. I think that bank management probably pays more attention to these issues than to any other issue in banking right now.

In mergers like Chemical and Chase, a lot of branches will close. Will this hurt less affluent neighborhoods?

One way banks are becoming more competitive is that as mergers take place they start closing branches. If you think about where the most over-branched areas are, they’re places where institutions have been in place for years, and those tend to be urban areas. I’m not sure, though, that disproportionate branch closings that are not economically justified are taking place.

Does a merger affect where a bank lends?

Other countries have low- and moderate-income areas and have done fine with four or five or six behemoth banks. Having said that, I probably share the innate prejudice that the local bank knows me and my family better.