Revitalizing Communities Across the USA

Revitalizing Communities Across the USA

When thinking about patriotism, what comes to mind immediately, are the brave men and women of our armed forces and their families. And rightly so. Their devotion to this country and selfless commitment to defend us, its citizens, no matter what the cost, is the backbone of this Great Nation.

There are, however, smaller deeds that we civilians can do at home to honor our country and better the lives of those around us. There are also ways that financial institutions can help. In fact, they are mandated to… reinvest in their communities.

The Community Reinvestment Act, however, signed into law by president Carter in 1977, is older than four of the Democratic 2020 Presidential hopefuls. Modernizing it is long over due. So long overdue, that when the OCC issued its advance notice of proposed rulemaking (ANPR) last August, it drew more than 1,500 comments.

It’s not surprising. There are two major definitions that have to be revisited and redefined so as to leave no question or doubt on the part of the banks or regulators.

1)  What constitutes community reinvestment? While this may seem obvious, it can be anything but. It is possible for a bank to go for years  believing something qualified for CRA credit when it did not. That is both unhelpful and unacceptable. Part of that is because the current rules are old, but more so that  they are ambiguous. Bankers and regulators need clear definitions.

2)  How do we define “community”? Again, at first glance this too seems obvious. But 42 years ago there was no such thing as an internet bank (or the internet). We didn’t even have interstate banking before 1994.

The 1977 law requires banks to reinvest in the areas where they have branches.

4-Star First Internet Bank has one branch in Indiana and a loan production office in Arizona. Yet, as its name suggests, it is an internet bank and operates virtually everywhere. What, specifically, should be required of it? And where?

Similarly, 4-Star American Express NB is one of several credit card banks operating out of the state of Utah. It has no other physical locations but we all know its breadth.

Then we have the behemoths. The big banks that have literally thousands of branches all over the country and some beyond. How should “community” be defined for them?

Once the definitions are made clear, regulators must be able to be both objective and consistent in their ratings. And low and moderate income neighborhoods nationwide should be able to reap the benefits.