Bank building encircled by human hands

New Hope for Distressed Communities

Congressman Gregory W. Meeks (D-NY), believes the Community Reinvestment Act (CRA), born in 1977 under President Carter, is experiencing a midlife crisis. If CRA were a person, we may be inclined to agree with him… but it’s not. It’s old and outdated and needs to be rejuvenated (JRN 35:25).

If you don’t think so, consider how many advances we’ve made since 1977. Here are just a few:

GPS—Internet—Fiber optics—Email—Cell Phones—DNA Sequencing—WiFi—  B2 Bombers—Seedless Watermelon—Antilock Brakes—Digital Cameras—Drones—Electric Cars—MP3 Players—PCs/Laptops

With all of the new technology, we must be able to do a better job of preventing red-lining and other forms of discrimination. Of course, new technology also brings with it new ways to skirt the rules.

Reportedly, our new Comptroller of the Currency, Joseph Otting, told the House Banking Committee that he never “personally observed” discrimination in his 30+ years of banking. While that seems almost unfathomable, to his credit  he also said he is looking forward to reviewing the comments from people and organizations that have a stake in CRA once the Advanced Notice of Proposed Rulemaking is made available to the public. He seems sincere in his desire to “better encourage banks to lend in low- and moderate-income neighborhoods, consistent with safe and sound operations” as CRA was originally intended.

Excerpts from his testimony (and corresponding push-back) follow. You be the judge.

Mr. Otting’s testimony before the House Banking Committee on June 13, 2018 included the following excerpts:

–  I believe in the power of community reinvestment to reinvigorate financially distressed areas and to give residents of those neighborhoods new hope and new economic opportunities.

–  I want to expand the types of activities eligible for CRA consideration to include more small business lending and community development activities and strengthen the CRA regulatory framework to benefit future generations.

–  We should expand the types of activities that qualify for CRA consideration.  …Communities also need more small business lending, student lending, economic development opportunities, and in some cases, additional opportunities for consumers to access credit including responsible, short-term, small-dollar consumer loans.

–  We have the opportunity to encourage banks to help neighborhoods become communities where families can make a living and not just reside.

His goal is auspicious: more transparency and uniformity so that decisions relying on CRA data can be made more quickly and CRA performance evaluations will be more consistent and meaningful.

While there was understandable consternation at Otting’s comment, he and other regulators seem to be willing to work with the Congressional Black Caucus (CBC) and both sides of the Congressional aisle to implement a new, improved version of CRA.

In fact, the CBC wasted no time in requesting a meeting with regulators to “enlighten” them on the current state of discrimination. The Chair, Rep. Cedric Richmond (D-LA) wrote to Otting:

–  Your inability to speak out forcefully against examples of existing discrimination in this country leaves us with serious doubts about your ability to implement the announced rule changes in a way that appropriately fulfills their purpose.

And Harvard’s Joint Center for Housing Studies June 2018 Executive Summary states:

–  But not all households and not all markets are thriving, and affordability pressures remain near record levels. Addressing the scale and complexity of need requires a renewed national commitment to expand the range of housing options available for an increasingly diverse society.

We don’t see this as a mid-life crisis facelift, but as a much-needed, more robust,  next generation CRA. We can, and must, do better.