WASHINGTON — Comptroller of the Currency Joseph Otting stood firm in defense of his agency's proposal to modernize the Community Reinvestment Act, calling out critics of the plan who he said do not have their facts straight.
"I have no problem with people challenging this. This is a complicated, emotional issue," Otting said of the CRA plan unveiled last month by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. "I just want people to operate from a point of facts. And then if you want to criticize the proposal, don't only criticize it but tell us how you would make it better."
In wide-ranging remarks to reporters, Otting took issue with recent views expressed by Federal Reserve Gov. Lael Brainard as well as some community groups, on issues ranging from how a modernized CRA framework would measure compliance to how the regulatory agencies are using data in the reform process. The Fed notably balked at supporting the OCC and FDIC's plan.
Otting also affirmed the commitment of the OCC and the FDIC to a 60-day comment period, defying calls by Democratic lawmakers and community groups to double the time to 120 days.
When asked whether he sees the possibility of a later comment deadline, Otting said, "I don't."
He noted that the OCC has projected potential changes to the CRA implementation framework while developing the proposal for over a year.
“We have been working for 18 months on this,” Otting said. “And so I think it's plenty of time. We're happy to sit down with anybody that wants to come in if they don't understand parts of the proposal."
The comment period was already effectively extended, Otting said, due to the lag time between when the plan was released in December and when it was published in the Federal Register. With the comment period now set to end on March 9, Otting said the total comment period will be 88 days.
Whatever CRA reform plan is finalized will have far-reaching implications for how banks are graded under the 1977 law, which has not been substantively modified since the 1990s. The plan proposed by the OCC and FDIC would allow banks to get CRA credit outside their traditional assessment boundaries and create a new metric of a bank's total CRA performance, which would in part be based on the dollar-value of CRA projects, among other changes.
But the Fed has refused to back the OCC and FDIC's plan, expressing concerns that echo those of community groups that the reform plan could dilute banks' CRA activities in the neighborhoods that need them most.
Otting said at this point it is hard to see how the Fed could join the OCC and FDIC's proposal.
“There's limited ways that the Fed could catch up with us on this,” he said. “My thought or vision for this will be, we will do a joint OCC-FDIC rule, and then the Fed will have to make a determination whether they want to ultimately pick what we've done or modify it for the 15% of the banks that they regulate on a CRA.”
The Fed’s decision not to join the OCC and FDIC's proposal was a departure from the regulators' more typical aim of seeking consensus on a hugely consequential policy reform.
In a speech earlier this month, Brainard indicated that the disagreement has to do in part with the formulation of CRA performance metrics. While Otting's proposal would combine various CRA measures into a single score, Brainard suggested a competing vision that would separate certain tests, such as those for community development and retail lending.
But on Wednesday, Otting dismissed Brainard's remarks, noting they were not accompanied by an official proposal from the Fed.
“If you really think about it, I could give a speech on tiddlywinks tomorrow,” Otting said.
A policy speech, Otting said, “doesn't take into account the combination of what it looks like to do it" in a notice of proposed rulemaking, "and an NPR is incredibly detailed with a lot of information, a lot of approaches.” The OCC and FDIC's proposal, on the other hand, “takes into account 18 months of work and 18 months of feedback from people on how to structure this,” he said.
Otting also took issue with a claim by some critics that the Fed's views are more grounded in data than those of the OCC plan. After Brainard’s speech, many observers praised the amount of data and analysis from the Fed she used to underpin the argument that certain CRA tests should be kept separate, including a database with 6,000 CRA reports dating back to 2005.
Some analysts said that the OCC and FDIC’s proposal, by contrast, contained fewer examples in the regulators' analysis that led to proposed policy changes.
“When people say the OCC doesn't have data, they're just flat wrong; we have tremendous amounts of data,” he said. “Now, we want to look at actual bank data to compare this and that” ahead of the final rule.
Asked if the agency would consider separating the tests for different components of CRA evaluation — like retail lending versus mortgage lending versus community development — the answer from Otting was a simple, flat “no.”
Otting said the OCC believes its proposal to modernize CRA will increase lending by "roughly $500 million a year."
"That's roughly $40 million a month that isn't getting put into communities if we don't modernize," he said.
