NCRC’s view of CRA reform done right

Just Economy Conference – May 5, 2021


Come hear a short presentation by long-time NCRC staffer Josh Silver who has protected and advanced CRA from when they were a young adult to now at middle age (more than 20 years!). The 20-minute talk will capture the major technical but vital CRA reform elements ranging from assessment areas, data collection, the structure of CRA exams, asset thresholds and more. They will also make a case for an interagency rule. As many questions as time allows will then be answered by the presenter. You don’t want to miss this TED talk!


  • Josh Silver, Senior Policy Advisor, NCRC


Silver 02:46

Good afternoon, my name is Josh Silver. I’m a Senior Advisor with the National Community Reinvestment Coalition. During this webinar, we’re going to talk about reform of the Community Reinvestment Act focused on regulatory reform of the Community Reinvestment Act. We will be comparing and contrasting the approaches of two federal agencies regarding three forms of CRA regulations. And just in a nutshell, CRA regulations establish an examination process for banks, banks undergo an exam and get graded based on how many loans investments and services they are making in low- and moderate-income communities. So there are actually three bank regulatory agencies. Life would be simpler if there was one, but there are three. There is the Federal Reserve Board, which most people have heard of. But then there’s also the Office of the Comptroller of the Currency, which is not as well known, but regulates nationally chartered banks, which tend to be the largest banks in the country. And the last regulator that most people have heard of is the Federal Deposit Insurance Corporation. Over the more than 40 years of CRS history, the three agencies have promulgated CRA regulations jointly. But in 2020, we witnessed something that was unprecedented. The Office of the Comptroller of currency broke from the other two agencies, and changed CRA on its own. And a final rule was issued in late spring of 2020. This final rule was not only criticized by community organizations, but also by bank trade associations. Meanwhile, the Federal Reserve Board issued what is known as an advanced notice of proposed rulemaking. This is not a final rule but this is an ANPR. A federal agency asked the general public about what their thoughts are for reforming a regulation. But in this ANPR is very detailed in the Federal Reserve Board discussed a lot of its initial ideas for changing CRA. So we’re going to compare and contrast the final rule of the OCC with the main ideas that the Federal Reserve Board discussed in its ANPR. One of the first things to consider when discussing CRA exams are what are the component tests. There is currently a lending test and investment test and a services test. For large banks. The Federal Reserve Board is proposing to largely retain this structure. But we’ll be tweaking it a little bit. They will have two retail subtests, they’ll have a retail lending subtest and a service reach service retail subtest. We’ll talk a little more about the components of the tests a little later. But the retail lending subtest looks at home and small business lending to low and moderate-income borrowers and communities. The service test looks at branching. Then there are two other subtests, a community development finance subtest, think of community development finance as having a neighborhood-wide impact, like economic development financing for a shopping mall, or financing for 200 unit rental housing development. So the community development finance subtest looks at those activities and Community Development Services subtests. The last one looks at housing counseling and other services related to introducing banking and lending to underserved populations. So those are the four subtests. So the Federal Reserve boy, the Office of the Comptroller of the Currency went in a different direction. They proposed a CRA evaluation measure, which would be the predominant measure in their CRA exam. It consists of the dollar amount of CRA activities divided by the dollar amount of deposits. We’ll talk about this in more detail later. But we think it really skews bank activities to the largest deals, because banks are going to be seeking to boost the numerator of this ratio or the dollar amount of CRA activities.

And these are the largest deals are not necessarily the most responsive to me. The OCC retains a retail lending test but this test becomes pass/fail and counts less for the exam. The OCC eliminates the service test looking at branching, and its treatment of its final treatment of branching in the CRA evaluation measure does not adequately replace the service test in NCR C’s estimation. There is a variety of needs in low- and moderate-income neighborhoods. Having a variety of performance measures like the Federal Reserve Board is contemplating is a better approach and tried to boil down CRA exams to predominantly one ratio, so we prefer the FET approach here. In addition to the structure of a CRA exam, banks of different sizes, get different CRA exams, large banks over a certain asset size, have the more complex exams that look at retail activities, but also community development and financing activities. small banks have a more streamlined exam that consider primarily retail lending activities. Both the Fed and the OCC retain this division. In addition, both agencies talk about their strategic plan option. I won’t talk about that in detail here, but during the question and answer session, happy to answer your questions if that is of interest. A very important issue here is what should the asset threshold be differentiating a small bank exam with a large bank exam. Currently the asset threshold was $326 million dollars. Banks above $326 million in assets have a large bank exam that hat looks at retail lending activities and Community Development financing. Banks with assets below that level. have just a retail lending exam, the Fed is contemplating raising this to $750 million. And NCRC thinks this would be a mistake. Under this proposal, communities could lose up to $5.6 billion and Community Development financing over a three-year time period. This is based on a previous NCRC study. And the smaller large banks, if you will, are predominantly located in smaller metropolitan areas and rural communities. So this would be counter but counterproductive and NCR C’s estimation. So the asset threshold level is something that is that stakeholders should bear in mind and CRM reform. So let’s talk a little bit about we talked about exam components, what types of exams different types of banks get, let’s let’s talk about the actual performance measures on CRA exams are the Federal Reserve proposal, they would retain a lot of the current performance measures, such as the percentage of retail loans, home loans, to low- and moderate-income borrowers and low- and moderate-income census tracks. These are tried and true and fine measures. On the community development test, the Fed would add a quantitative measure, which is the dollar amount of community development finance divided by the dollar amount of deposits. But in addition to this quantitative measure, there wouldn’t be a qualitative measure. That’s called an impact score. And it would have a scale from one to three, the Fed proposes we actually think it should be a wider scale like one to six or even one to 10. But what the qualitative measure will do is it would counteract the tendency of just a ratio tool awards, you know, the largest deals, there are a lot of smaller community development, financing activities that are really needed and responsive to need and communities. So those would get higher scores on the qualitative measures. So if you design it right, the qualitative and the quantitative measures would, you know, balance each other out. The OCC, again, focusing on the CRA evaluation measure, would bias banks, in our estimation towards the largest deals, and the lending retail test would become pass/fail instead of graded, which would diminish its importance. And think about some important small dollar needs like a $10,000 loan for a very small business. We think that this OCCs ratio would diminish the importance of that activity, which is very important.

The Fed’s performance measures aren’t perfect. Currently, 98% of banks pass 90% of banks get a B, I think there is a very important case for making the grading a little more rigorous. And the Fed does not really address this in detail, or in sufficient detail, how its thresholds and we can talk about thresholds in the question and answer how much threshold which would, you know, make grading a little more rigorous and a little more distinction real distinctions among bank performance. So, another very important component of CRA reform is assessment areas. Assessment areas is fancy jargon for geographical areas and CRA exams. In 1977, when Congress passed CRA banks made loans through branches, and today branches remain very important for making loans. But we all know even baby boomers like myself know that the internet is an increasingly important activity for retail even including lending up in addition to the internet. Loan brokers and loan correspondents and loan officers who are not necessarily in branches are being increasingly used by banks. So how do you account for this in geographical and geographical areas of CRA exams? The Fed is proposing whether there is a threshold of activity such as 100 loans in a geographical area that does not have a bank branch, that area would become a new assessment area. They would call it a lending-based assessment area. They have a similar concept for a deposit-based assessment area. We, NCRC, supports this concept. The OCC also introduces this concept, this concept in its final rule, but it restricts new assets. is too restrictive and new assessment area designation. Only if 50% of the bank’s deposits are outside of its branch network, would these new assessment areas Be creative could be created, we think that is too high of a bar, and too few new assessment areas would be created. To really motivate banks to improve performance. The great majority of their activity needs to be on CRM exams, and you cannot omit a large amount of the activity which could happen under the OCC’s proposal. Let’s talk about what qualifies for CRA consideration. This is particularly important in the area of community development financing. And when there is more certainty about what qualifies. This will increase the amount of CRS activities undertaken by banks. Sometimes there’s confusion, both by community groups and by banks. And activity that could be very responsive to need won’t be performed. So in order to clarify what counts on CRA exams, both agencies the Federal Reserve Board in the Office of the Comptroller currency proposed creating what is called a qualified list of activities, examples of activities that would qualify, that is fine in concept. But if you qualify, this becomes too long. There will be a tendency on the part of banks to not to refrain from engaging activities that are not on the list. And that would be a harmful outcome. Even if an agency says this list is just illustrative and not exhaustive. There will still be that tendency in our estimation, the list should really be more of a principles-based list. Talking about highlighting activities that are you know, might be complex about whether they qualify. In addition to the notion of a qualified list, there is a procedure that both agencies are probably going to implement while the OCC implemented a preclearance procedure. And that literally means a bank and or a community organization talking to regulatory officials about whether an activity would likely qualify. And this is very important because CRA exam cycles are two or three years. And a bank does not want to wait for two or three years to find out that that activity that is undertaken doesn’t qualify for CRA.

What is also under discussion is should activities qualify if most of the benefits do not accrue to low- and moderate-income populations. NCRC urges extreme caution here, because CRA was intended to focus on low- and moderate-income communities that were formerly redlined or discriminated against. The OCC goes way too far away from this in our estimation, and would qualify large infrastructure projects like major bridges as counting even though a lot of these bridges may have tangential benefit. Only tangential benefit to low- and moderate-income communities Think about your ratio. If you’re financing something like the George Washington Bridge that would really boost your ratio, and again, provide a powerful motivator to do to stray away from the smaller deals in neighborhoods that are very important. But even the Fed may stray a bit too far away from the focus on low- and moderate-income and is contemplating offering credit for financial education offered to all income levels by a bank and NCRC thinks the greatest need for financial education remains in traditionally underserved populations and low- and moderate-income populations. So these are worthy debate, issues for discussion and debate. Again, we have the three agencies come together and issue a rule. So there’ll be a lot of time to discuss these issues, and particularly the next issue, race and CRA in by statute is an income-based law. But the tragic murder of George Floyd and other very important issues of racial equity have arisen in the last year. Race and CRA has been a topic discussed for several years. It is getting increasing prominence in the discussion. The Federal Reserve asks a question about how to consider race on CRA, but then doesn’t really do a whole lot about it in their advance notice of proposed rulemaking except to discuss more support for minority depository institutions, which is important but not the total solution and NCR C’s estimation, both agencies talk about adding underserved areas on CRA exams. The OCC adds underserved tracks, census tracks on CRA exams, but their formulation in my estimation wasn’t really tested. That well. NCRC has an approach for underserved tracks that looks at low levels of lending. And you would add those underserved tracks to the subtests looking at say the percentage of loans and underserved tracks, and NCRC does a white paper where we identify a lot of these underserved tracks would be my job majority-minority communities. So this would be one way of better-incorporating race on CRA and racing, CRA and really targeting underserved communities. Data disclosure and CRA. This is critically important for CRA reform. You can’t measure bank performance adequately if we don’t have adequate data. It is very simple. And in particular, the data on community development financing is not good enough to do a robust job on CRA exams. This data needs to be available, at least on the county level NCRC advocates it for being available on a census tract level. And if you think back on the performance measures, the ratio of community development financing divided by deposits. Of course, it has to be made publicly available on a county level and available for CRA examiners. And there’s a better there’s a need for better deposit data as well.

NCRC believes there’s a need for Community Development financing data for major categories, the dollar amount of affordable housing, finance, for example, or the dollar amount of economic development financing. I won’t go into all the details here. But we prefer the Federal Reserve’s approach. The OCC final rule requires a collection of all this data, but not the public dissemination of this data. And you need the public holding banks accountable and looking over their shoulders, not just the CRA examiner in order to really maximize the accountability of banks, and to motivate them to increase lending invest in new services. And one very important aspect of race and CRA, by the way, is fair lending exams that do occur supposed to occur at the same time of CRA exams, and a bank get downgraded for its rating if widespread discrimination is found. In addition to testing for making sure there’s no discrimination, there is a variety of consumer protection laws that are checked for in the fair lending review. The Federal Reserve Board is explicitly thinking of adding the Military Lending Act and the Service Members Civil Relief Act as laws that would be looked at during the fair lending review. We support this and also looking to make sure there’s no discrimination in the provision of deposit products as well as retail lending, which is also very important. We think that the Americans with Disabilities Act should be a law that is also exclusively looked at during the fair lending review. The OCC made it harder, or they issued a memo even before its final CRA rule to double downgrade, say from an outstanding to a needs to improve rating. If there’s widespread evidence of discrimination or another violation. We think this is the wrong approach because there could be instances and there have been instances of very egregious violations of consumer protection law that should be able to face a wide awake a wide array of sanctions, including significant staff, if warranted. We’ll go through more. We’ll go through house assessment areas count on CRA exams. But let me just briefly mention that right now. There’s an issue of what’s a full scope and a limited scope assessment area on a CRA exam. A full scope area receives more credit or more comments Hence of exam, it counts more. Whereas the limited scope assessment area receives more of a cursory review. Historically full scope exams. full-scope assessment areas have been those assessment areas, with the largest dollar amount of the posits, which biases you know, which creates tendency for full scope areas to be the largest areas the largest metropolitan areas, whereas the smaller metropolitan areas or rural counties tend to get shorter shrift and CRA exams. The Fed is proposing to eliminate this distinction where we support the elimination of this distinction. The OCC in some regards goes the other way, by allowing a bank to fail in too many assessment areas and still pass its CRA exam in its final rule. Let’s talk about this more in the question and answer if it’s a topic that is of particular interest to stakeholders. But there is a very important relationship between bank mergers and CRA exams. Bank mergers is one of the most important times for CRA enforcement. A bank has to get permission from its regulatory agency to acquire another bank. And its recent CRA performance is an important factor in these merger reviews. So you can imagine if a CRA exam is easy, the CRA exam lever in a merger review process is not going to be very effective. So that’s why CRA reform needs to create rigorous and meaningful CRA exams that public input a public input can have a key factor in influencing. And actually the Office of the Comptroller of currency removes language in its final rule saying that public comment on a CRA performance would be considered by a CRA examiner while the CRA examiner is conducting the CRA review. And we think this is the wrong way to go the opposite way to go. And also during the question and answer time period, we’re going to talk a little more about community benefit agreements which are not required under CRA, but has been a tool used by NCRC and banks to help banks demonstrate a public benefit, which they are required to demonstrate as they’re emerging. So not only is CRA exam performance reviewed, but also whether a bank is achieving a public benefit as a result of its merger and not just, you know, slap, cashing a lot of branches and cutting a lot of lending. So that is the conclusion of my TED Talk. And now happy to take questions. And we have about 35 minutes to do. So. Thank you look forward to your questions.



Good afternoon. I’ve noticed some comments. Good to see you, Ramona and Arden. Glad you’re watching. And I know there’s some others. Please put some more comments in. And not sure whether the participants are unmuted. But let’s start with Ramona. She had a lot of comments. She says she likes to preach preclearance idea. And she does not like counting large infrastructure projects. I am told actually that the participants are muted. So if you want to ask a question, please put it in chat. And large infrastructure projects have also had a very bad history in particularly communities of color, you know, stories of highways splitting up predominantly minority communities and destroying them. And this was in the 50s and 60s, the highways would go from the downtown to the suburbs that were predominantly populated by white people. So you have to To this day, you have to be very careful about large infrastructure projects. And they enhance communities and do not detract from communities but they should not be part of CRA exams in my estimation. They should be financed through other mechanisms. CRA exam should really talk about that to really address the lack or the shortage of credit and capital in traditionally underserved communities. That’s what the intentions of the founder CRA including the activists like gelson, kata and the members of Congress like Senator William Proxmire most often talks about gentrification should be a factor. It is today on CRA exams, but we don’t have, you don’t see it discussed a whole lot in CRA exams. currency, our exams could just could do a better job of dealing with gentrification and make sure that projects are not displacing low and moderate-income people. There are ways to measure the level of gentrification in a census tract. Starting to get a bunch of comments. So I’ll just finish this real quick. And you could do it for example, by median home prices and in census tracts with high with home prices that are really on the high end of things. You could do different things you could say that lending to say upper-income people in those census tracts would not count on the CRA exam. And there’s other ways to make sure that there’s not displacement occurring of like multifamily developments, make sure that a certain amount is reserved for low and moderate-income people, for example. So Michelle says the importance of an interagency approach to the regulation of CRA cannot be understated. What is your reaction to the request to formally withdraw delay, the OCC is June 2020, CRA rule from Bank trade associations. Thank you back trade associations. We totally agree with that. CRA cannot be implemented effectively. If it has if there’s different CRA rules depending on who your regulator is. Imagine banks trying to collaborate on a project, a really worthy community development project and facing different rules. It just won’t work. So we hope when we have even when we have the interim controller, you may have seen the news looks like the treasury secretary will appoint an interim comptroller who is a very well qualified, who’s now at the Federal Reserve Board and supervises large banks that we hope even when there’s an interim, which hopefully be shortly that there’ll be a process of halting and reversing the final OCC rule that we think is damaging to communities up and starting on an interagency basis using the FET. NPR is the basis for a new rule. Let’s see, somebody says I’m new to the area of care what happens when a bank does not do well on their CRA exam? Well, that’s a very good question. We get that question periodically. There’s no monetary penalty for bank failing and CRA exam or getting like a C or a C minus. You know, the head thing, some notion of maybe reducing the fees for deposit insurance on the other end banks are getting, you know, an outstanding grade but I would make the make that if you do that make outstanding, really harder to get. But one way that’s the predominant way that CRA is enforced right now is I talked at the end about merger reviews.

And when there’s a merger review, if a bank is not doing well on a CRA, CRA that can delay a merger. There could also well the regulator is asking the bank questions and time is money in the banking industry, even if a merger is delayed and ultimately approved, that that has a cost. But if also, an agency can do a conditional merger approval, approving a merger but making conditional on specific improvements in CRA performance. So that lever over the years we have found is effective. You know CRA has had an aim has Federal Reserve researchers found has increased lending in low and moderate-income census tracts by up to 20%. And think of a neighborhood on the edge of being viable or not being economically viable. A 20% boost is a big deal. So I hope Victoria that answers your question or at least answer some of it. Is it possible to revisit the dare disclosure slide? I’m not sure I can. I have the technical expertise to go back to the side. But there’s really two areas with data needs to be significantly improved. Community Development financing, as I mentioned earlier, and deposits by the geographical location of deposits. Right now. There’s kind of some hit or miss directions of which branch to assign deposits. We have a member for example, who used to be worked for bank CRA worked for several years in CRA departments of banks. And he says this is possible to improve deposit data. There is very important work done by the Federal Reserve Board of St. Louis with Cities Empowerment Fund, the bank on project that also has collects data on deposits. So I think it is feasible to significantly improve data disclosure and to make CRA exams more rigorous and more meaningful that way. Romi asked yet. What to see, what is your exit CRA exam determined and how are assessment areas utilized? Well, assessment areas is areas where they contribute to CRA rating. So they’re very important. And you’ve got to make sure as we update CRA that the great majority of a bank’s lending activity is covered by it assessment areas. Think of it this way, if less than 50% of your activity is covered by an exam. You know, say I took Spanish and it’s not graded, I won’t do as well in Spanish, I might focus a little more on hit on American history or something like that. That would be the same tendency for any human being or any institution. So as lending goes beyond branch networks, we got to make sure that assessment areas continue to cover the vast majority of bank loans. And we also got to make sure that the smaller areas like rural areas, and smaller cities, count in a meaningful way on CRA exams right now. There is a huge issue with that. Bethany says race should specifically be included in the CRA performance evaluations. The current process is brushed aside the issue of discrimination or redlining and in redlining or discrimination, even when they have poor record to lending to people of color. Very simply. NCRC agrees with that. And we have been asking for explicit consideration of race in CRA exams. I have colleagues, Gerron Levi and Brad Blower that are doing really excellent legal work on this.

We have to make sure that this passes legal muster. And we think it does. We think there was a way to design this Stay tuned for a white paper in the coming months. But there was we actually submitted two comments to the Fed. One comment was everything under the sun. You know, the Fed asked 99 questions. I spent about one page per question 100 page comment. But there was also a separate comment submitted by NCRC about this particular CRA and race. I hope we can get more explicit consideration of race on CRA exams, looking at say, the percent of loans to people of color, very straightforward. But at the very least NCRC has offered the notion of underserved census tracks. And what that is if you measure the number of loans per capita, and think of what CRA is all about getting more lending and investments in underserved communities, redlined communities. What more explicit way to say hey, look at lending, you say retail lending in underserved census tracts. And guess what we computed that on average 57% of the residents of an underserved census tract are people of color. So if you add underserved census tracts saying that lending test or the community development test, I think that would also be tremendously helpful. So I’m going to try to work through all the comments. One thing that I’m going to say right now, just the biggest picture of this is I’ve been at NCRC. Since 1995. I came in November of 1995. Just when guess what that was the last time they had a regulatory update to CRA so I’ve been at this for 25 years, and we have had kind of some tweaks to the regulation but not you know, a full revision of the CRA regulations. 25 years later, you see a lot of baseball stuff in the background. I’m a big baseball fan. And think of how hard it is for a team to win a World Series that happens about once every 25 or 30 years. Some teams takes longer. It took the poor Chicago Cubs 100 years, let’s hope it does not take 100 years for CRA. But it seems like it’s taking 25 to 30 years. And I actually hope this is one of the culminating things in my career. We have to get this right is so so important. It’s so hard. It’s so important and we offer have to talk to all the stakeholders, you have to get community organizations and banks in the same room and hash out some, you know, difficult issues like assessment areas, there are legitimate issues on both sides of the discussion in the debate. And there has to be some equitable compromises made. There are some things that we are highly not comfortable with, like the notion of a national one assessment area for the whole country. I think we can do better than that. But we have to get this right, we have to turn down the temperature, turn down the rhetoric, and treat this more like solving a crossword puzzle than trying to get one over your political point of opponent and really trying to figure this out. And I hope we can do it. So that’s just, you know, my baseball analogy. This is really hard work. But it’s so important. And you know, when we do this, and I hope we do this next year or two, we shouldn’t wait 25 more years, we should have some sort of updating process approximately once every five years or so. So it’s not as hard.

So, Jake asks, Illinois, he recently passed its own state CRA law. Yes. Congratulations. That includes both credit unions and nonbank mortgage lenders. Very, very important. What do you think assessment airy should look like for mostly online nonbank lenders. And he mentioned a large mortgage bank? Well, Jake, that’s an excellent question. And actually NCRC did a white paper shortly before the Fed issued its ANPR in December of 2020, because we are anticipating this, and with mortgage companies, you have the home mortgage Disclosure Act. So you can figure out in every single state in the country, every single metropolitan area, every single county, especially for a large mortgage bank, where they’re running, and where they have significant amounts of loans. And, you know, the again, the Fed had proposed assessment areas where there’s 100, or more loans. We think that’s a good starting point. But also on this white paper, we’ve looked at that we identified a very interesting pattern, where you have states that have lower level of lending activity, and again, loans per capita, the mortgage banks tend to have a higher market share. So think of just think of it intuitively. Jake is sitting in his, you know, office like I am, and you know, there’s not a bank branch near him, we’re not as many bank branches as they would be in a more say, larger state with a larger population, he might be more apt to look for a mortgage company loan. So that’s why we think, at least in the case studies in this white paper, that they have a higher market share in states and not as well served by banks. So for them emphasize those states and MSA and rural areas, which are not as well served by traditional lenders and think about making some priority areas, assessment areas based on them on those areas of relatively underserved areas, but also make sure the assessment areas cover the great majority of the London. Okay, Lou was asking about the interagency CRA process. Glad that was answered. Keith asked if you don’t like the national review for internet banks, how would you approach to lending? I hope I just answered that. Because think of a large mortgage company like Quicken, it’s basically an internet bank or an internet mortgage company, right. More and more of these banks are doing small business lending. Yes, you’re absolutely right, quick, Keith. Before the pandemic, remember jumping in an Uber or a taxi? Gee, I haven’t done that in over a year. I remember running a credit card through thing that looked like a square. It was a square it was it was Square Square is now a bank. It is an internet-based bank that lends across the country. And that’s absolutely right. As well as these large mortgage company lenders, you’re going to increasingly have small business lenders that are increasingly not using branches. Matthew Lee, a longtime scrc member love to hear what mcrc expect some new controller in terms of merger you do information available during the comment period public hearings, penalties if issues are raised by community groups are not addressed by the applicants. Actually, and in the fall of 2020. The Department of Justice asked about antitrust review on merger applications. And there I won’t go into all the technical details but there is a great need to update the anti trust review and the data you an antitrust review. And part of this is, by law, banks are required to demonstrate a public benefit for their merger. There have been some large bank mergers over the last number of years, where there is supposed to be a discussion of public benefit. On a merger application, you’ll see two paragraphs Oh, there’ll be more ATMs and branches offered by large bank a, because we’re acquiring bank B. Well, if you don’t close all the branches, just by arithmetic, there’ll be more branches. But that’s not a public benefit. A public benefit means making sure that there’s not dramatic reductions in loans and branches that in fact, the reverse if there’s increases in loans and access to credit and capital. So put it in writing that we propose, actually to the appropriate justice, that mergers over a certain size.

We propose $10 billion, you know, in a perfect world NCRC would say on all mergers. But you know, we live in a world where you have to make compromises. So we said $10 billion. And we described in our comment letter, why $10 billion. That banks with this level of assets that this level of assets actually have to put in paper, what their public benefits would be document increases and branches, services, loans, innovative approaches for reaching traditionally underserved communities. And during the public comment tip during the public comment period, people could comment on the adequacy of the public benefit. And absolutely, yes. But on the foyer question, Matthew, when, particularly when there’s discussions between bank, regulatory officials and banks during the merger review, sometimes the bank will ask technical questions. This is secret right now. And it should not be secret. It this these discussions should be revealed to the public to make sure the regulator is not greasing the skids or somehow favoring the merger. Just technical information is provided. Keaton, what are your thoughts about climate sustainability programs qualifying for Community Development lending test as an innovative financing program? Absolutely. It happens today. This should be a more explicit discussion of this and CRA exams. But energy efficiency improvements. Think of the old old-fashioned thing that you know when I came in the 1990s weatherization programs for house for housings for older housing stock in the Midwest, what gets a little cold in the winter, right. That’s also energy-efficient efficiency and climate control. greening urban areas. There’s a lack of green greenery in a lot of urban areas and a lot of just a lot of concrete and that contributes to global warming. That should also count for community facilities as part of revitalizing and stabilizing communities so we can improve increase the prominence of these activities. But also there’s been some important research done by the Center for American Progress. I was talking about underserved tracks earlier, there is a correlation between underserved tracks in areas with environmental hazards or unhealthy air pollution. So if you were revitalizing underserved tracks and trying to reduce environmental hazards, you are also addressing climate control. And in the definition of understood tracks, I am supportive fully supportive incorporating some measures of environmental distress as well look at the Center for American Progress have a has a paper on their website. I encourage people to look at it. Seth, by your estimation or activist investors asking your banks to focus on CRA or slow down these activities. That’s a good question that I don’t have the answer to I think relay to shareholder activism. You know, some of the people that I know that cross my field Affordable Housing and Community Development and also engage in shareholder activism. I don’t think we’d be asking banks to so damn CRA related investments, quite the reverse. And lil actually asked me a tongue-in-cheek question:  are there minus grades on CRA exams? This is actually a very, very important question. This issue of CRA grade inflation you know, 90% of banks pass 10% get outstanding 90% give satisfactory. in a given year one or two one to 2% of banks fail I’m actually more upset about the 90% getting one grade. I mean, it’s unimaginable that 90% of the students in the class or 90%, of institutions can be performing in exactly the same way. And part of the problem here is you have four ratings as the overall grade, which was, which were, which was in the statute. So the agencies have backed away from adding a fifth rating as a possible overall grade. And NCRC has proposed point scales to accompany the four ratings. So say that 90% satisfactory, if you had a point scale, you could I think, separate the banks that have kind of low satisfactory versus high satisfactory level, think of your highest satisfactory ca minus, or maybe the B plus.


I think that would be critically important and keep the five ratings you have high and low satisfactory. On component tests on the lending test, the Fed is actually asked a question, should the different tests like the lending test have four wait for ratings? No, keep it five ratings, you need to have real distinctions in performance, to motivate banks to do to do better, and the bank trade associations actually agree with NCRC? on this point. Robert, what are you what are you two? What are the top two initiatives that bank could do to differentiate itself by materially uplifting its community development efforts in and out of CRA? In other words, is there an additional pedagogical widget to be built by a bank? Well, there’s going to be quantitative and qualitative measures on on, I hope, a well constructed Community Development part of the CRA exam. I would, you know, hope that banks are above average, on the quantitative measure, we talked about the community development divide by deposits, but that the qualitative measure is a very important component, a compliment, quantitative measure, it just can’t be like, you know, a race to the most jobs, because then you won’t get your catalytic widgets, you’d get more of the larger deals that are not necessarily the most responsive. So you have to have a robust qualitative scoring mechanism that counts for roughly 20 or 30% of the test, and would look at things about aspects like environmental sustainability, job creation, job creation for local residents in the neighborhood, jobs that are more of a permanent nature, not just a short term jobs. For example. We’re going to have I’m going to be on a panel with one of my colleagues, Andrew nature’s nature tsen. On May 10, next Monday, should journalism companies on a local level, should that get CRA credit? It’s a really interesting question. But the flow of information and neighborhoods have been impeded by the closure of a lot of newspapers. A lot of cities don’t have a newspaper. But there’s also a need for community papers to talk about the local incinerator, for example, or alternatives to incineration, for example. Phyllis does NCRC has have a template for organization members to use when having a conversation with CRA bank officials. A really important question, we have negotiated community benefits agreements in the context of a merger application, I think, and I think fellas, you’ve been involved some of those discussions. Think about that as a template. What are examples in those discussions of innovative retail lending, community development, lending and investing that banks have agreed to? I thought that the presentation yesterday john Taylor and the CEO, the President and CEO of PNC Bank was terrific. Kudos to Bill Demchak for calling to all those listening sessions, several of them and listening to the needs and communities and coming up with a product where you can order your payments to avoid overdraft for example, low downpayment lending, the micro business loan of $10,000 or less home lending accompanied by home mortgage counseling for example, try to true but really important and credit repair for example, that gets done in homeownership counseling, we have to have adequate financing Heck, I could have used a homeownership counselor or a trusted advisor. And I’ve been in this field for 25 years when I bought a house. There’s a lot of fees that come up on the closing table, for example, did I get an adequate inspection? When my house was being inspected? You know, the inspector was a family friend, but if he wasn’t, how would I know?

So, you know, that is critical, you know, funding trusted advisors like housing counseling for people, particularly low moderate-income people who might be the first one in their families and generations buying a home RCR exams result published for the general public, yes, you can get a CRA exam over the internet. I joke, you know, if my grades in high school and college publicly available, I probably would have worked a little harder. That is part that is the genius idea of CRA making CRA ratings is a publicly available data publicly available. There’s nothing like the publicly available data and ratings to motivate changes in human or institutional behavior. Lou provide the website. Okay, there’s to some discussion among you. Among you are talking about where you get CRA ratings. Credit Union should be CRA regulated, we would agree with the bank trade associations on that one. They are CRA regulated in Massachusetts. No credit union has closed their doors in Massachusetts, as far as I know, because of CRA exams, you can look at them, the CRA exams are very reasonable. I think they do in one area, one very important area. Credit unions have probably done more in the area of community development, lending and investing. As well as retail lending as a result of CRA exams. That’s just my initial hypothesis here, particularly the large mainstream credit unions. Heck, when I watch a baseball game, my Washington Nationals, they said, you know, the PenFed, one of the largest credit unions in the country, anybody can join. That sounds like a bank. You know, think of the think of credit unions in the day. Back in the day when they were associated with an African American church, for example, they really served underserved people. Now think of Penn fed saying anybody can join. Okay, if you’re going to go that way, you’re going to have a CRA exam, very simple. FDA loans covered in CRA. I think that means FHA loans, a Federal Housing Administration. Yes. Oh, she said, Yes. She clarified that. I’m coming down to the last three minutes. I think I can answer the last question here from Celia, African American capital spending as large lending institutions that we struck lending to people of color minority business owners support to trend of noninvestment dollars and community color. Imagine how transformative it would be if people co dollars would be invested in their communities to be alone with commercial building and taxes, housing, employment, community improvement dream is not impossible to achieve. I totally agree. And I think that more rigorous CRA exams but also support for minority depository institutions that are doing some great work and reinvesting people of color, dollars into the communities, community development financial institutions, there is discussion in the Federal Reserve ANPR.

We are supportive of increasing incentives for an increase in the geographical scope, where banks can make investments in these important institutions. But at the same time, though, bank should not rely on these institutions as a crutch, or it should not become the bank’s only CRA program. Oh, we just wrote a large check to minority depository institution. Tomorrow is important as minority depository institutions or CDFIs are not going to replace the lending levels of Bank of America. We got to make sure the hundreds of 1000s of loans that the largest institutions in the country make the largest banks make that low- and moderate-income people are getting an adequate amount of this lending activity. So a rigorous retail lending test for large institutions and also more support for you know, community of color and local institutions and communities of color that are reinvesting. It’s 159. I think I’m coming at the end My time I’m told I can can run a little over if I’m needed. There is probably every year we’re told to will urge to ask people to throw out the evaluation forms. One reason I did not go with a panel this year, is I wanted more q&a time with the audience. And when you go with a panel, when you have four really intelligent people talking, you 10, and you get really engaged in discussion with them. You tend not to have as much q&a time. So I just said this year, you know, maybe I just do a TED talk and have people ask questions. Maybe next year I do both. I have one session with panelists, because I would have had panelists this year that I had engaged before some really excellent people doing excellent work around the country. And I know who they are and maybe how even more names have come to my mind next year. So I think next year I would like to do this little TED talk but also have one other session where I’m really lifting up voices that I think really doing good works. Any last minute questions or comments? If people find this useful put in the chat. What could have been better? I actually was trying to talk for only 20 minutes I ended up talking for 24 I even wanted more time for q&a oh yes ask for breaks did I get outstanding high-status factory low-status factory needs to improve with substantial noncompliance I hope that these bankers listening as well as community organizations, I think that there are you know, people from Bank trade associations and CRA officers because, you know, they come to our conference year after year and you know, really have informative discussions with them. Lou says this is great. Anybody want to give me a rating?

Robert, thank you.

Yes, you’re either a CRA officer or a somebody from a bank trade association. Jake says outstanding rating.

Thank you.

People like my bobbleheads in the background. Jean says outstanding. Let’s next make CRA reform easier than winning a World Series Come on. Andrew says I help him wrap his head around CRA I hope I demystify for people. What’s my contact information? Jsilver@ ncrc.org. Again, really easy. first initial my first name j and then silver like to color j silver@ncrc.org. happy to hear from you. Keith says


Great job as usual. Wish we were in person. Absolutely. I agree. 100%. Can’t wait to we can meet in person without masks on.


I went to a baseball game the other day with a mask. But I didn’t do that until I was fully vaccinated.


Get your vaccines friends if you have it. Lou says go knacks by the way healthcare facilities that can be financed by CRA that’s an example of community development. Sylvia says terrific Thank you. There is a red button below for your screen. Okay. Do we offer these classes online? Jeunesse? Yes, absolutely. And NCRC does have an academy that does trainings in person and online. Kara says next year in person terrific.



I probably should add maybe just in another minute or two or three. I’ll give people like one more minute because you know give you an update. I think the next series of workshops session started 230 give me an opportunity to grab lunch, stretch your legs. Take a walk around the block walk, your dog. Since we are sitting at home these days, dogs have really enjoyed it. I’ve really enjoyed the last year I think But so glad that you’re healthy. And well enjoyed this presentation. Okay, the last comment here. And I think I will ask my colleague, Maggie to end the presentation. Thank you. Thank you all. It was a lot of fun.

Print Friendly, PDF & Email

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

Complete the form to download the full report: