Category Archives: Citizen Wealth

Signing of CRA in 1977

City National Bank Shows Why Some CRA Proposals are Wrong

New Orleans      There’s a big split within the federal banking establishment about what to do about revisions to the 1977 Community Reinvestment Act.  This is not your run of the mill, chest thumping, and elbow pushing in Washington over turf and regulatory jurisdiction.  It’s actually very important, particularly to low-and-moderate income families and their hopes of obtaining decent and affordable housing.

Recent reports had the Office of the Comptroller of the Currency (OCC) moving forward without agreement from the other major players, the Federal Deposit Insurance Corporation (FDIC) and, most importantly, the Federal Reserve Bank, which is the primary enforcer of the banks CRA obligations in lending.  The OCC gang wants to give banks credit for putting big dollops of dollars somewhere close to lower income neighborhoods and letting the big one-off expenditures cover their CRA requirements without focusing on family lending.  The FDIC has joined them in large part.  The Federal Reserve has finally come out foursquare against allowing the CRA score to be tilted towards big community development projects such as loans to hospitals, universities, and other claimants and in favor of maintaining an emphasis on individual lending in lower income areas for home mortgages.  The OCC/FDIC plan would also allow banks to “buy” their way out of their obligations by claiming packages of loans in rural areas and to small businesses, even where they have no operations, rather than doing the hard work of upgrading the areas that need investment where they have operations and branches.  The OCC/FDIC plan would start with the dollar amount claimed by a bank as CRA eligible, rather than breaking the loans into the key baskets for evaluation that have been the sharpest teeth left in the Act over the last more than forty years grinding it down.

Looking at the acquisition of City National Bank (CNB) in Los Angeles by the Royal Bank of Canada (RBC) is a good example of why the OCC/FDIC changes would be disastrous.  The CNB community reinvestment work had been lackluster prior to the merger discussions, and numerous groups didn’t hesitate to make that known to the Federal Reserve.  RBC finally prevailed in the acquisition largely by agreeing to make a $11 billion investment in CRA loans over a multi-year period that is now going into its final year.  ACORN requested the public file on CNB’s CRA work recently to see how they have fulfilled their commitment.  I’ll keep you out of the weeds, although we’ll invariably comeback to CNB and RBC in the future, but they are failing on their commitment pretty drastically, and with the clock running out, it’s hard to see how they would be able to pass muster without a miracle.  This is largely the case because from the numbers it appears that they have continued to not take loaning in lower income areas seriously.  They claim that they have made some big community development loans and they have purchased some community development loans.

CRA was about raising all boats in lower income neighborhoods, especially for families, and not just shoring up some remote islands to look over vast oceans of poverty starved for loans and investment.   Looking at the public file, CNB/RBC seems to be betting and believing that the OCC/FDIC proposal has already succeeded, and that there will be no consequences to their failure to live up to their loan commitment to low income families and their neighborhoods.

The OCC/FDIC proposal must be stopped or the failure of CNB/RBC will be the rule, not the exception, and once again lower income families will be left in the cold while banks preen and pretend to have served the purposes of their charters.

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Please enjoy Never Enough Money by Martha Wash.

Thanks to KABF.

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Government Policies and Inflation are Making the Poor Even Poorer

San Juan   There was something to celebrate on the first day of a new decade.  President Trump for only the second time in his term of office did NOT tweet.  What a relief! The other time was the day after the Mueller investigation report was made public.  This time, who knows?  He may have been kidnapped for the day by a roving band of pirates off the coast of Florida.  Maybe they came from Puerto Rico in protest of the lack of support for their hurricane recovery because of, as some may remember, his earlier claim that the island territory was “in the middle of the ocean” and too far away to help.  Certainly, almost all the restaurants in San Juan were closed on New Year’s Day, so the wait staff could have been the ones manning the boats.  I’m not sure.  I’m just offering some alternative facts.

The war talk and chest thumping over Iran pulling the strings on a US embassy takeover in Baghdad did decrease as the protestors withdrew after the Iraqi government promised to support a resolution asking the US to withdraw troops from that country.  On the other hand, the war on the poor continued to accelerate as the Department of Agriculture doubled down on its plan to take another 700,000 people off of food stamps.  The Secretary claimed it is all about getting them to work without reckoning with the fact that most recipients are already working, they just aren’t making enough to adequately and healthily feed their families.  The New York Times Upshot column noted that when lower income families ate better it saved $1400 a year per person in health care costs and had led to reductions in Medicaid spending in a number of states.  Does the administration care or is this all about a body count?

Even as many bemoan the rising gap between the rich and the poor and the federal government pushes to make the poor even poorer, other studies, including a recent one from a team of researchers connected to Columbia University and the Groundwork Collaborative have found that they are already poorer than previous statistics had determined.  Reported in The Hill, they found that “Real income for low-income Americans fell more than 7 percent between 2004 and 2018, in part because of rising costs for items and services purchased by those Americans.”

Inflation in goods that are already more highly priced for poor families is under-reported, making the income gap experienced by lower income families more pronounced.  Seven percent may not sound like much, but in a country the size of the United States it means that,

Using their inflation measure, the paper’s authors estimate that 3.2 million more people would fall below the poverty line, bringing the nation’s total to 41.4 million. The U.S. population in 2018 was about 327 million.

It seems hardly the time to intensify the war on the poor, when they are already getting poorer.  What would it take to get the Trump administration to finally negotiate a peace in this war and withdraw its bureaucratic troops at USDA, DHHS, DHS, and the other agencies?  It’s past time!

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