The Washington Post: Overhaul of anti-redlining law sparks rift among financial regulators

The Washington Post, December 15, 2019: Overhaul of Anti-Redlining Law Sparks Rift Among Financial Regulators

A proposed overhaul of a 40-year-old anti-redlining law has created a rift between three powerful financial regulators.

The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp. (FDIC) have unveiled an ambitious plan for updating the 1977 Community Reinvestment Act, which would give the banking industry new flexibility on meeting government-mandated goals for investing in poor neighborhoods.

But the Federal Reserve has, so far, refused to sign on to the proposal.

Key to the Community Reinvestment Act is geography. The 1977 law was passed to address redlining, a practice in which banks refuse to extend loans in certain poor communities or charge those borrowers more.

Under the current rules, federal regulators judge banks on the types of loans and other business they do in places where they have branches, ATMs and other physical operations.

Between 2012 and 2017, banks spent an average of $78 billion a year on community development lending and $55 billion a year on small-business loans in low- and moderate-income neighborhoods that fall under the law, according to the National Community Reinvestment Coalition. Banks were also given credit for billions spent on mortgage loans to low- and moderate-income borrowers in poor neighborhoods.

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