American Banker: CRA’s black box could prove difficult to open

American Banker, April 11, 2018: CRA’s black box could prove difficult to open

On April 3, the Treasury Department released a memorandum to the federal banking agencies with its findings and recommendations for reform of how those agencies administer the Community Reinvestment Act.

With CRA, however, the problem is more difficult: Objective, transparent standards will necessarily involve regulators choosing what counts and what does not, even if done through a proper notice and comment process. So, they will have to play the role of Goldilocks in a way that the Fed need not in CCAR. One alternative — akin to to using bank models in CCAR — is expanding the use of CRA strategic plans, whereby banks develop their own CRA plans and submit them to the relevant regulator for approval. The Treasury reports that the regulatory burdens and delays associated with this option have deferred them from using a strategic plan since it first became an option in 1996. A streamlined process could be developed to make this a live option.

In any event, the Treasury Department has done regulators, and others who care about community reinvestment, a favor by recognizing the need for reform and establishing a sound analytical basis on which to begin that difficult task.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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