Reimagining the Community Reinvestment Act
The last time one of the country’s most important tools to address redlining was updated, a loaf of white bread cost 99 cents, a dozen eggs were $1.16, and bananas were three pounds for $1.00. To say we lived in a different economic era would be an understatement.
Last month, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC), and the Federal Reserve Board of Governors released a Notice of Proposed Rulemaking to strengthen the Community Reinvestment Act, a civil rights era law that ended the discriminatory practice of redlining and obligated banks to reinvest in low-income communities, resulting in trillions of dollars of lending and investment in underserved communities.
Redlining was the deliberate effort by government, banks, realtors, and insurers to work together to draw red lines on maps around communities of color, deeming them “hazardous” for investment. The modern day impacts of redlining on communities of color are visible in the continued denial of home mortgage loans, higher interest rates and fees, predatory lending, higher home insurance rates, and lower home appraisals.
The CRA was meant to address and correct for some of these harms, however, the law never explicitly included race in its assessment framework. Further, the last time the CRA was substantially updated by the three agencies was in 1995. Since then, the financial system has changed, with expanded online banking and interstate lending, while racial disparities in lending and wealth creation have persisted or worsened. Despite this, the new proposed rule still doesn’t take race into account.
This is a historic and rare opportunity to update the rules to explicitly examine race within the CRA in order to increase reinvestment in communities that were historically redlined and continue to experience economic and climate inequities.
Racist public policies led to a need for CRA, so explicitly race-based criteria that hold banks accountable to serving communities of color is necessary to genuinely address decades of race-based disinvestment. Greenlining recommends that an updated CRA analyzes lending by race and ethnicity, and not just income.
This rulemaking process also offers an opportunity to support the resilience of communities vulnerable to climate change. The proposed rule includes a new definition of “disaster preparedness and climate resiliency” and lists eligible investments that would provide meaningful support to communities. Greenlining will recommend strategies for scrutinizing investments in fossil fuels, as well as potential approaches for incorporating climate vulnerable communities into CRA exams.
- Join us for an informational webinar to learn more about the CRA and how you can be part of this rulemaking process:
- View our Community Reinvestment Act Fact Sheet for an overview of the CRA, the Notice of Proposed Rulemaking, and Greenlining’s initial analysis and recommendations.
The Greenlining Institute has a decades-long history of working in coalition to successfully negotiate community benefits agreements with financial institutions regulated under the CRA. We are working towards a future where communities of color can build wealth, live in healthy places filled with economic opportunity, and are ready to meet the challenges posed by climate change. But, in order to realize this vision, the financial industry must be held accountable and responsible to all communities.