The Return of Lending Discrimination by Banks

Ohio Savings BankNew Orleans Finally there is some small notice of the fact that banks are abandoning the poor and their neighborhoods.  A report from the FDIC (Federal Deposit Insurance Corporation) found that almost 1000 net branches had been lost in 2010.  Certainly not surprising to anyone is that the loss has been much higher in lower income and minority dominated areas, while branches continue to explode in upper-income areas.  Fingers will inevitably be pointed in all kinds of different directions other than back towards the banks themselves:  the economy, bank closures, blah, blah, blah.

The next shoe to fall is going to hurt more.

A preliminary report I reviewed from A Community Voice, the membership community organization in Louisiana (www.acommunityvoice.com) of the results of their extensive data crunching of HMDA (Home Mortgage Disclosure Act) data on lending for 2009 (the most recent year available) reveal a significant return of racial discrimination in lending across impacting all minority segments.  The A Community Voice should be available in March, so we will see what conclusions they draw, but the early indications are deeply disturbing and were revealed in a hearing before a Department of Justice hearing in the Lower 9th Ward of New Orleans last night. I’m not sure where else the data is being reviewed or released, since this used to be an annual project of ACORN at least when I was there, but we should all keep our eyes out for these numbers.  They will not be pretty.

The much maligned Community Reinvestment Act (CRA) blamed so roundly and falsely by the right and Republicans as a whipping dog for the housing crash and the Great Recession for supposedly moving loans to the poor, was more appropriately characterized in a story in today’s Times.

“The C.R.A. has been a financial Maginot Line – weakly defended and quickly overrun,” said Raymond H. Brescia, a professor at Albany Law School.  What’s more, Mr. Brescia said, while closing branches violates the spirit of the law, if not the letter, he could not recall a single example in which a bank was cited by regulators under the C.R.A. for branch closures in recent years.  “The C.R.A. leaves banks a lot of leeway,” he said, “and regulators have not wielded their power with much force.”

And, frankly, Professor Brescia is guilty of understatement if anything.  Lending discrimination never really left, as he points out, but at least it receded and there were efforts made and lip service spent.

Given the huge setbacks in homeownership by minorities due to the recession, this should be a battleground widely engaged to attempt to recapture this ground, hold and extend the line again, but it will only be so, if we have the capacity and commitment to reengage banks and push back again with whatever weak tools we still are allowed.  If not, no army of “Elizabeth Warrens’ can prevent the implosion of payday lending, predatory financial institutions preying on the poor and moderate income families across the land.

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