WHYY, March 31, 2020: Amid COVID Crisis, Trump Moves to Quietly Gut Laws Against Racist Lending
The federal government is poised to weaken a law that desperately needs to be strengthened—and to do so in the midst of the COVID-19 crisis, depriving people of the chance to weigh in.
The proposed changes would undo banking regulations put in place to ensure that all of the city’s communities get equal access to investment and loans — laws designed to protect businesses and residents of areas that have already been hit hard by coronavirus.
From 2009 through 2018, for example, banks in our area reported making $45 billion in mortgage loans and $8.7 billion in business loans in lower-income neighborhoods. It is difficult to isolate the impact of the CRA, but we know that much of this lending may be at risk with the proposed regulatory roll back. Researchers found in 2017 that, when census tracts in Philadelphia lost their CRA eligibility, lending there decreased by 10- 29%.
Additionally, because banks’ CRA records are considered when banks seek to merge, the law can give the affected community a seat at the table. In 1986, when two Philadelphia banks proposed a merger, 34 community groups banded together to challenge it. The broad coalition, represented by Community Legal Services, charged that the banks had violated the CRA by refusing to make loans in the low-income, mostly minority neighborhoods of Kensington and North Philadelphia.
The coalition won real benefits for the community; the banks agreed to make low-interest home purchase and improvement loans to residents and to fund housing and economic development projects. And later, after sub-prime lenders peddled high-cost predatory loans to low-income, minority residents and the country headed toward the foreclosure crisis, these low-interest CRA loans continued to perform well.
And if the proposed changes go through unchecked, inequity will only be compounded as Philadelphians seek to rebuild after the COVID-induced economic crisis.
The CRA cannot undo centuries of institutional racism, but principled improvements to the law could reinvigorate it as a valuable tool.
