The New York Times: A green light for banks to start ‘redlining’ again

The New York Times, Aug 28, 2018: A green light for banks to start ‘redlining’ again

The Community Reinvestment Act was passed in 1977 to end the practice of “redlining,” by requiring banks to lend money in the communities where they are chartered to do business or receive deposits. Banks have made nearly $2 trillion in small-business and community development loans since 1996.

But the law didn’t erase discrimination. Nor has it ended America’s glaring economic segregation, which is caused in part by unequal access to banking and credit. Three out of four neighborhoods marked “hazardous” by government surveyors 80 years ago are still lower-income today, according to our analysis.

On Tuesday, the Office of the Comptroller of the Currency announced it will review and revise the rules it sets for banks to comply with the Community Reinvestment Act. One of the proposed changes is the introduction of a mathematical formula, a ratio, that banks and regulators could use to measure a bank’s performance under the law.

This ratio would be the value of all of a bank’s community lending activities — loans, services and philanthropy — divided by some measure of the bank’s capacity, such as total assets or total deposits. It is supposed to bring more clarity to how the government assesses compliance with the law. It sounds reasonable, but coupled with an expansion of the kinds of activities that could count as “community lending,” it could allow banks to make fewer loans in poorer neighborhoods. This seemingly small change could have sweeping consequences for millions of Americans and affect tens of billions of dollars annually in lending.

“To be sure, the Community Reinvestment Act, like most regulations, can be improved. We’re eager to work with the regulatory agencies, Congress, banks and the entire financial sector to modernize it,” writes Jesse Van Tol, chief executive at the National Community Reinvestment Coalition.

Discrimination, in the past and continuing today, is at the core of the wealth gap between whites and people of color. We can’t allow banks to cherry-pick where they lend. One easy formula is no substitute for a commitment to invest in all of America’s communities.

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: