Nonprofit Quarterly, April 8, 2020: Will Federal Regulators Gut Community Development under Cover of COVID?
A month ago, NPQ noted that rules changes proposed by two of three leading federal regulators of banks, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC), threaten to gut a leading piece of legislation that has supported community economic development, the Community Reinvestment Act (CRA). The law, passed in 1977, established an “affirmative obligation“ for banks to make their financial services, loans, and credit available to low- and moderate-income residents, especially in communities of color, helping direct nearly $2 trillion in lending to disinvested neighborhoods since the mid-1990s.
As NPQ noted in February, the proposed regulations would convert a set of context-dependent qualitative and quantitative tests into a single ratio—total CRA-eligible dollars over total deposits. Because only half of the assessed areas would have to hit benchmarks for a bank as a whole to pass a CRA exam, the bill would create a clear invitation to return to redlining. And the lack of community-specific standards means that community accountability would be vitiated.