American Banker: The ‘C’ in CRA should still mean something

American Banker, April 18, 2018: The ‘C’ in CRA should still mean something

The Community Reinvestment Act, a law that was put in place in 1977 to address redlining, is finally receiving the modernization that community groups and the banking industry have long called for. But with Main Street taking a beating by the Trump administration’s gutting of the Consumer Financial Protection Bureau and stripping of key Dodd-Frank Act provisions meant to reign in Wall Street banks, you can’t blame us for being skeptical of Treasury’s “modernization” recommendations.

After all, Wells Fargo dropped from an “Outstanding” to a “Needs to Improve” rating on its most recent CRA exam for illegal and discriminatory credit practices. Now Treasury is questioning if CRA exams should even downgrade banks for discrimination; the recommendations reference a recent OCC update in which discriminatory behavior or other illegal credit practices by a bank do not necessarily lead to downgrading. Treasury recommends a principle they refer to as the “logical nexus” to determine if such behavior is relevant to CRA before considering grade changes.

We are left wondering if this is truly a “modernization” effort or an attempt by the banking industry to change the rules of the game.

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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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