Next City: How to Evaluate a Bank’s Community Reinvestment Act Evaluation

Next City, July 13, 2021, How to Evaluate a Bank’s Community Reinvestment Act Evaluation

There’s a little-known story about the former U.S. Senator William Proxmire who once got into a squabble with federal banking regulators while he was chair of the Senate Banking Committee, in the mid-1970s.

Proxmire wrote to the regulators insisting they already had the authority under existing banking laws to require banks to lend wherever they took deposits, instead of just taking deposits from some neighborhoods while never lending in those neighborhoods. Back then, as now, banks often took deposits from Black neighborhoods while denying loans to residents and businesses in those neighborhoods.

Senator Proxmire believed that since a banking charter is actually a license to create money in the name of the U.S. government, banks had a special obligation to use that license for public good. Banks create money whenever they make investments or make loans. Funds show up instantly in borrowers’ deposit accounts, which then get exchanged between accounts at that bank or between accounts at different banks. Most money in circulation today and for many decades has been simply accounting entries in bank records, not actual hard currency — economists sometimes call it “checkbook money.”

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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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