American Banker: Dear regulators: Don’t take CRA’s revamp too far

American Banker, October 31, 2018: Dear regulators: Don’t take CRA’s revamp too far

Bank regulators, like referees, should be unbiased and base their decisions on facts with input from fellow regulators, just like when referees confer to make the right call. There are, however, an increasing number of critics who believe that some of the actions by Treasury and the Office of the Comptroller of the Currency to date on Community Reinvestment Act reforms may not meet these criteria. Both Comptroller Joseph Otting and Treasury Secretary Steven Mnuchin worked together at the same bank that faced considerable CRA protests from community groups in a highly contested bank merger. Bank regulators have a critical role in balancing the interests of banks and their customers, which is why Otting has also been criticized for viewing banks as the OCC’s “customers.” Most importantly, there appear to be some factual inconsistencies with the comptroller’s recently stated rationale for his current CRA reform effort: “Despite the best of intentions, the CRA regulatory framework, which has been pieced together over the past 40-plus years, is outdated, ambiguous, overly complex, and unnecessarily burdensome. These problems hinder banks’ ability to fulfill the statute’s goals.”

The overriding public policy concern with CRA expressed by critics of the current reform process is that a biased and nonfactual view of CRA by a lone-wolf regulator could weaken it. The fear is that if virtually everything a bank does everywhere counts for CRA credit, the law will have been effectively repealed. Good public policy suggests that it is time for the FDIC and the Fed to work with their fellow referee to make sure the goal is to improve and modernize CRA in an impartial and fair way rather than totally overhauling it.

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