Process of Gutting the Community Reinvestment Act Gains Steam

Citizen Wealth Financial Justice Ideas and Issues
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Little Rock       Any time the head of the American Bankers Association says that it’s a good thing that any part of the government is looking at rewriting and revising the 1977 Community Reinvestment Act, known popularly as the CRA, it’s very bad news for lower-income and racially diverse communities.  Sad, but true, that’s exactly the reality we’re facing now.  According to Payments.com, Rob Nichols, president of the American Bankers Association, said in a statement to Reuters that, “The current framework is holding back investment in communities the law is intended to serve, while failing to account for significant innovations in the banking sector, including the opportunities presented by mobile technologies.”

If that doesn’t sound like a pile of hooey, I’m not sure does.  Mobile technologies?  Trust me on this, there is nothing in the CRA that addresses what platform might be used to facilitate equal lending without discrimination on race, ethnicity or income bias, it just says you can’t do it, and if the Federal Reserve or if any of the regulatory agencies charged with policing the CRA catch you, then there’s trouble coming.  Reading Nichols’ statement Jane Citizen would think that the law in 1977 mandated that you had to be sitting on a leather chair in a branch bank – remember there used to be lots and lots of branch banks in the 70s – but that’s not the case.  So, much for the innovations point, and I can’t imagine what the ABA thinks is holding back investments “in communities the law is intended to serve” other than more conservative restrictions many banks imposed to punish our communities after their reckless greed imploded the real estate market, coming to a head in 2008.

The CRA is more than 40 years old and bankers and their political friends in Congress have been steadily pulling its teeth throughout that period.  The supposed “burden” of CRA is having to keep the records, which they do anyway for their own internal purposes, and, worse for them, transparently reporting the data on borrowers.  Then it is reviewed and compared locally, regionally, and nationally and discrimination is more easily determined by regulators, if they are interested, and they are graded so that consumers know where they are least likely to face discrimination when they apply for a loan.  How hard is that?  The rub for the bankers is that they are supervised, and when the regulators step up and do their job, there can be penalties.  Others want special breaks for so-called community banks to allow them to discriminate more broadly, but lord knows why anyone thinks that would be a good idea?

The Office of the Comptroller of the Currency (OCC) has now put the process of rewriting or revising the CRA in motion by asking for public comment over the next 75 days.  The Federal Deposit Insurance Commission and the Federal Reserve also have critical roles in supervising banks and CRA implementation.  Some published reports indicate that there is less than total consensus between OCC, FDIC, and the Federal Reserve on this process, which, thankfully, has been slowing this gutting job to date.

Our best hope now is that if they stumble long enough and control of Congress changes, community organizations, advocates, and anyone who is committed to a more equitable America may once again prevail in saving not only the letter of the Community Reinvestment Act, but it’s spirit as well.

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