An anti-redlining law that doesn't address redlining — that is the legacy of the Community Reinvestment Act. Despite its founding as the last of a series of groundbreaking civil rights laws meant to address government-backed systemic discrimination, the CRA has and continues to fall far short of the remedies civil rights leaders hoped to achieve.
In May, federal banking regulators released a Notice of Proposed Rulemaking that would update the CRA for the first time in decades. The proposed rule changes, however, have not gone far enough to help Black, Indigenous or People of Color (BIPOC) communities. The regulators failed to put forth a race-conscious CRA that would right the wrongs of the past or ensure a fair economy for all.
What's at stake now is a new rule that remains race-blind and doesn't live up to its intended purpose of preventing redlining. The public must now react quickly, as the deadline to submit comments on the proposed changes ends Aug. 5.
Regulators are trying to take a "both-sides" approach with the proposed rules changes by recognizing racial disparities while maintaining the failed status quo that attempts to use income as a proxy for race. They should instead ensure that banks meet the credit and investment needs of both BIPOC communities and communities abused and ignored by the banking industry.
Before President Jimmy Carter signed the CRA into law in 1977, government policies promoted discrimination and segregation by discouraging banks from making home loans in Black and Brown neighborhoods, while simultaneously excluding those populations from quality education, affordable student loans, Social Security payments and more.
While we recognize the immense value of the CRA as a tool to bring resources to the communities we serve in New York City and California, it has not lived up to its original intent. More than 40 years later, the data makes clear that color-blind policies have not worked. You need look no further than the lack of intergenerational wealth, lower rates of homeownership, underfunding of BIPOC small-business loans and lack of opportunities for wealth creation for proof. In fact, the
BIPOC communities are losing bank branches while being flooded with high-cost check cashers, pawnshops and in some states, payday loans. They are also being inundated with higher-cost nonbank lenders as banks retrench. The same cannot be said for predominantly white and wealthy communities. Additionally, middle-income Black families with less wealth cannot access affordable CRA products that offer financial assistance. Yet, Black and Brown tenants are often harassed and displaced by landlords who receive easy access to bank financing.
The CRA was meant to rectify this type of discrimination and disparate treatment. Instead, it encouraged banks to "serve the convenience and needs of the communities, including low- and moderate-income communities in which they are chartered to do business." Income is not a proxy for race. And by failing to take the issue of racial discrimination head-on, the CRA has failed to address the generations of discrimination against BIPOC communities. The CRA also failed to set our banking system on a path toward providing BIPOC households and communities equal opportunity and access to loans and investments that create stability and assets.
In a time where reparations are being seriously discussed in California and Black Lives Matter is a rallying cry, it is not acceptable to put forth an anti-discrimination law that is race blind. Regulators must create affirmative obligations for banks to fairly and equitably serve BIPOC people and communities. They must incentivize activities that close racial wealth gaps and downgrade banks for activities that contribute to harm and displacement, as they do with formal discrimination cases.
Additionally, they must better enforce fair lending laws, and expand disclosure by race and ethnicity to all areas of CRA and factor it into banks' ratings.
Timing is critical. Without comments that do not speak to the needs of BIPOC and communities, we'll be forced to live with a weak rule that does not address their needs for the next several decades.
