CRA reform should include race and rewards for top banks

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Karl Renney

As we celebrate nearly six decades since some of our nation’s most landmark civil rights laws came into force, this year we have a unique opportunity to have a positive impact on affordable housing, community development and small businesses.

Fifty-nine years ago this month, more than 250,000 people lined up outside the Lincoln Memorial for the March on Washington for Jobs and Freedom. Less than a year later, Congress passed the landmark Civil Rights Act of 1964 prohibiting discrimination in public places, including restaurants, hotels, and motels, ending the era of legal segregation. in these places.

Suffrage was passed in 1965 and fair housing in 1968 with President Lyndon Johnson declaring, “Now, with this bill, the voice of justice speaks again. It proclaims that fair housing for all – all human beings who live in this country – has become part of the American way of life.

Darrell Byer

Title IX passed in 1972 prohibiting sex discrimination in schools and other laws in 1973 and 1975 protected individuals from discrimination on the basis of disability and age respectively. In 1974, the Equal Credit Opportunity Act was passed.

And then, in 1977, President Jimmy Carter signed the Community Reinvestment Act, prompted by a national movement against redlining, the practice of denying financial services to individuals based on the demographics of the neighborhoods in which they reside.

The CRA is a civil rights law

The CRA is fundamentally a civil rights law. His sponsor, Sen. William Proxmire (D-WI) said so on the floor of Congress.

“The data provided by [the Home Mortgage Disclosure Act passed in 1975] remove any doubt that redlining really exists, that many creditworthy areas are being denied loans,” he said.

However, this is a civil rights law that does not mention race, but instead attempts to underuse income as an indicator.

Earlier this month, our organization of bankers and community activists called on federal regulators to right this wrong from almost a lifetime ago. We said regulators should include race and ethnicity as part of a rewrite of ARC’s implementing rules and do so now, as they consider the first major update to these rules since 1995. single voice, representing both banks and community groups, we have offered these comments in an effort to help close the significant racial wealth gap that exists in the United States and here in Massachusetts.

Our bank members have a long history of serving low- and middle-income neighborhoods and communities of color. Many of our member banks have made specific and extensive commitments to racial equity over the past two years. However, we also recognize our industrys failure to fulfill other responsibilities to communities of color. Persistent racial disparities in lending should force federal banking regulators to explicitly incorporate race and ethnicity into CRA reviews.

Add an incentive to be exceptional

CRA law requires agencies to evaluate the establishments record of serving the credit needs of its entire community, including low and middle income neighborhoods, consistent with the safe and sound operation of such an institution. Given that communities of color are part of the larger community and nothing in law prohibits loan ratings by race and ethnicity, this seems like an ideal opportunity for regulation to talk about the importance of serving communities of color as a distinct party. of the whole community.

Although ARC is looking at serving low-to-middle income individuals and communities, low- and middle-income neighborhoods and communities are far from the same. Nearly two-thirds of low-to-moderate income households are white, while nearly 40% of black households and more than half of Hispanic households are non-low-to-moderate income.

We also use our voice to make an “outstanding” rating from the CRA worthwhile for institutions that devote substantial resources to ensuring that they truly meet the credit needs of all communities. In Massachusetts, 20% of banks earned the most recent “outstanding” rating, twice the national average. We attribute this to the efforts of our banks to comply and the strong non-profit community network that partners with these same lenders.

Let’s create an incentive to get an “outstanding” rating. Regulators could consider lower borrowing rates at the Federal Home Loan Bank advance window with a focus on improving economic development lending and affordable housing development initiatives for income communities low and medium. This would help lenders reduce borrowing costs and their communities in the form of more affordable community development loans.

Together, these reforms will create a Community Reinvestment Act designed to address our long history of racial disparity and discrimination while encouraging lenders to reach higher and redouble their efforts to ensure financial fairness for all Americans.

Darrell Byers is CEO of Interise and Vice Chairman of the Massachusetts Community Banking Council. Karl Renney is Senior Vice President and CRA Officer at Eastern Bank and Chairman of the Massachusetts Community Banking Council.

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