Medium, July 24, 2020: The Community Reinvestment Act Isn’t Working
In May the Office of the Comptroller of Currency enacted new regulations that overhauled the 1977 Community Reinvestment Act (CRA). These changes are now under fire. In June, House Democrats — led by Maxine Waters and Gregory Meeks — proposed a new bill that would revise the recent updates to the CRA.
What is the Community Reinvestment Act?
Quite simply, the CRA requires local banks to provide loans to low-income borrowers in their communities. This wasn’t always the case.
In the 1930’s, the Home Owner’s Loan Corporation (HOLC) created maps that redlined certain neighborhoods based on income and race, encouraging banks to direct home loans to green and blue neighborhoods. The HOLC maps legally permitted racial discrimination in lending, thus creating a feedback loop. “Red” neighborhoods’ mortgage values were depressed, depriving residents from accumulating wealth, ensuring that poor neighborhoods stayed poor. …
