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Brookings: Bipartisanship in banking is back

Brookings, March 4, 2018: Bipartisanship in banking is back

This week the full Senate is likely to consider legislation that for the first time meaningfully amends the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This set of edits to Dodd-Frank has assembled bipartisan backing with a group of moderate Democrats joining most if not all Republicans, providing the bill enough votes to likely pass. The legislation is about more than the small bank relief its supporters focus on, but neither would it gut Dodd-Frank as some opponents claim.

Aaron Klein discusses what he like and dislikes about the bill. Below is one of his criticisms which uses information from a NCRC study.

Elimination of Anti-Racial Discrimination Data Reporting (Section 104). Racial discrimination in lending, particularly real estate lending is sadly still a reality. For decades the federal government required data be reported under The Home Mortgage Disclosure Act (HMDA) as a powerful tool to help deter and detect racism. This legislation raises the threshold for which mortgage lenders do not need to collect of file HMDA data by more than 20 times. Doing so will eliminate data from approximately 5,400 or 85 percent of banks in the country.[20] This loss of data will make it particularly difficult in more rural parts of the country where smaller lenders may comprise more than a quarter of the market.[21]

Reducing data from smaller institutions will also skew existing HMDA data to give regulators, policy makers, and researchers a less accurate representation of what is happening. One of the biggest economic advantages that smaller and community banks provide America’s economy is an alternative way to allocate credit based on greater knowledge of their community. This is particularly useful for people who do not fit into traditional credit boxes. Eliminating the data from how community banks provide mortgage credit to people of color makes us all worse off and will ultimately hinder smaller banks from better telling their success story in helping to combat the historic and current patterns of racial disparity and discrimination in lending.

 

[21] National Community Reinvestment Coalition. Estimates of the Impact on the Collection of new HMDA data by a National 500 Closed-End Mortgage Loan Threshold.

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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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