The Wall Street Journal: Rules for lending to the poor under review

The Wall Street Journal, April 3, 2018: Rules for Lending to the Poor Under Review

The Treasury Department, in a memo released Tuesday, said the 1977 Community Reinvestment Act hasn’t kept pace with the evolving banking sector. The law, which was passed to stop “redlining,” a form of lending discrimination, is enforced by a complicated series of regulations. Treasury Secretary Steven Mnuchin and Comptroller of the Currency Joseph Otting, who both dealt with the law as executives at OneWest Bank, now a part of CIT Group Inc., have said altering the rules is a priority.

Proposed changes could free banks from some costly commitments they have had to make under the current CRA regime. For instance, banks often keep many branches open in poorer neighborhoods to get a good grade on the exam, even though these branches are far less lucrative than those in richer neighborhoods.

John Taylor, president of the National Community Reinvestment Coalition, a fair-lending advocacy group, said he was still “cautiously optimistic” about coming changes to the CRA rules, applauding Treasury’s suggestion that the geographic areas examined at each bank be tweaked.

But he said worried poor areas could lose more of their branches if the exam gives less weight to a bank’s branches. “The idea that the mobile phone is going to serve those purposes is naive,” he said.

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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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