Online Event Archive Recorded: May 21, 2025
NCRC Senior Fellow Josh Silver discusses his new book, “Ending Redlining through a Community-Centered Reform of the Community Reinvestment Act.”
This book talk explains:
- What is redlining and how it devastates communities
- How and why CRA was devised as a means to rectify redlining through community empowerment
- The successes and limitations of CRA in increasing lending and investment
- An overview of the legislative and regulatory history of CRA since its enactment in 1977
- Recommendations for updates to CRA, its application to other industries and the current threats to CRA
About the Author
With decades of experience in the CRA and fair lending field, Josh Silver spent most of his time as Vice President of Research and Policy and as a Senior Fellow with the National Community Reinvestment Coalition but also worked for Manna, Inc., a local nonprofit housing development organization based in the District of Columbia, and for the Urban Institute, a think tank also based in the District of Columbia.
Transcript:
NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.
Petrusz 0:08
Okay, thanks. Thanks for joining everyone. My name is Catherine Petrusz, and I am pleased to introduce today’s webinar Ending Redlining Through a Community-centered Reform of the Community Reinvestment Act. Next slide, please.
Thank you. So a little bit about NCRC before we get started. For those of you who are not yet members and aren’t familiar with NCRC, we’re a coalition of over 700 organizations throughout the United States all dedicated to making a just economy a national priority and a local reality. We work closely with our members to close the racial and socio-economic wealth and opportunity divides, and we do this work in many ways, including organizing agreements between financial institutions and members to increase lending investments and philanthropy in neighborhoods that need it. We advocate for policies that encourage fair and responsible lending and reinvestment. We produce agenda-setting, research and stories, and we convene events that bring together stakeholders to advance equitable solutions. The Community Reinvestment Act is central to NCRC’s work and mission. So I’m extremely excited about today’s webinar. Next slide, please.
A couple of housekeeping items. As a reminder, NCRC’s Code of Conduct applies to all of our gatherings, and we will have about 10 minutes at least at the end of today’s presentation for questions. So please use the Q and A button at the bottom of your screen to submit questions rather than the chat. We’re going to use that Q and A feature for the Q and A portion of the webinar. And be sure to follow us on social media.
A few notes about today’s speaker Josh Silver. Josh has decades of experience in the CRA and fair lending field. He spent most of his career as Vice President of Research and Policy and as a Senior Fellow with NCRC. And he’s also worked for Manna Inc, the local nonprofit housing development organization based in Washington, DC, and for the Urban Institute, a think tank also based in Washington, DC. With that, I’ll turn it over to you, Josh, thank you for being here today.
Silver 3:02
Well, thank you Catherine, and thank you, NCRC. It’s an honor to present today, and it was an honor to work at NCRC for almost 30 years. So when I left NCRC, somebody suggested to me, why don’t you write a book about the Community Reinvestment Act? And you know, I hadn’t really thought about that, but then I thought for a little bit, and what a great idea, and especially, put it down, put the thoughts down on paper before I forget.
And it’s really hopefully, it’s my gift to the next generation of community advocates and also bankers and regulatory officials. What we did right, what we did was maybe a little misguided. And so you have in this book, really the 50-year history of the Community Reinvestment Act and hopefully how it can be improved going forward. And you see the website right there. I have a website for the book, endredlining.com and the QR code takes you right to the website, and I hope some of you will purchase the book, either the hard copy or the ebook. So I’m going to start with what is CRA and the major themes, many of you on this webinar know what CRA is, so just bear with me for a couple of minutes. It is a law designed to combat discrimination or redlining against neighborhoods by requiring banks to serve community needs in all neighborhoods. How the CRA is implemented the Federal Bank agencies. There are three federal bank agencies rate banks or give them a grade based on lending, investing and serving low- and moderate-income neighborhoods and borrowers. And my book puts the community at the center, and the why the community should be at the center. For decades, there were neighborhoods in this country, mostly communities of color, that were victims of discrimination. And as a result, I think the communities really have a right to be at the proverbial negotiating table, and also the community residents live and work in communities, and therefore they have unique perspective on credit needs and other needs that other stakeholders, including banks, just don’t have because they don’t live there every day. So the one way of putting communities at the center is the federal agencies are required to consider the views of communities when conducting CRA exams or considering merger applications when banks want to when a bank wants to acquire another bank, for example, and I’m going to go into that in a lot of detail.
So the history of redlining, you’ll see that a little more in the next few slides. The definition is back before the internet, back in the 1970s when CRA, when Congress passed CRA, it was a refusal to make loans where the bank branch, even where the bank branches are, even in neighborhoods where there are bank branches, banks refuse to make loans. And today, fast forward to the internet. The digital version of redlining is when internet-based lenders can literally skip over entire neighborhoods using artificial intelligence and other technologies, you could skip over neighborhoods based on their demographic characteristics or/and or their zip codes or census traps.
Redlining was reflective of the racism in our society, but it was formalized, surprisingly, during the administration of Franklin Rooseve. lt in the 1930s, you had a Great Depression, and the Homeowners Loan Corporation, that’s one of the agencies. The Homeowners Loan Corporation was created to refinance loans of homeowners that were facing foreclosure. So how, why did the Hulk or the Homeowners Loan Corporation kind of formalize red money. They wanted to know the riskiness of refinancing loans. They were going to refinance loans for everybody, but they wanted to know which loans were likely not to succeed even after refinancing to lower interest rates. So across the country, they engage practitioners, real estate agents, appraisers, bankers, in drawing maps of neighborhoods, and they color-coded the neighborhoods based on the perceived risk of lending in the neighborhoods. Some of the criteria were objective, like the characteristics of the housing stock in the neighborhoods, but other characteristics, the predominant characteristic was racism, that communities of color, particularly African American neighborhoods, reflected more risk of lending just because of the people that lived in and lived in those neighborhoods. The least risky neighborhoods were color-coded green, and the riskiest neighborhoods were color-coded red. And decades later, these neighborhoods remain disadvantaged. After the Homeowners Loan Corporation, the Federal Housing Administration came into existence, which really facilitated Home Mortgage Lending by guaranteeing the loans that if a loan went into a foreclosure, the bank didn’t take the loss, but the Federal Housing Agency took the loss. And the Federal Housing Agency maps were very similar. They made maps too, which were very similar to the HOLC maps, a lot of it based on racism, and it wasn’t only redlining that disadvantaged communities of color and African American communities over the decades various tools of segregation, including racial covenants, which prohibited homeowners from lending to people of color and also Jews and other recent immigrants during the 1930s. That was outlawed by the Supreme Court in the second half of the 1940s but there were still other tools of segregation. Real estate agents would steer Whites to White-only neighborhoods and people of color to people to to to communities of color. Other forms of discrimination also put communities of color at a severe disadvantage, anything from discrimination in the labor market to discrimination in the school system. And to give you one startling statistic of the disadvantage created by redlining from 1930 to 1960 that’s three decades. Only 1% of FHA loans went to African Americans. African Americans were systematically cut off from the middle class. Most people entered the middle class by becoming homeowners, and these patterns repeated themselves in cities across the country, and the FHA had had a considerably larger market presence than it has today. So that’s just one statistic that shows you the systemic disadvantage that African Americans confronted.
I’m going to talk to you a little bit about the story of Freddie Gray. How does redlining impact individual lives? This is a mural of Freddie Gray in his Baltimore neighborhood. It’s a very sad story, Freddie. This is actually a map, a HOLC map of redlining, and you can see the red. The red-shaded neighborhoods were near the downtown in Baltimore. They were the neighborhoods deemed riskiest for lending. The green neighborhoods were deemed least risky for neighborhoods. The yellow neighborhoods were somewhere in the middle. Freddie lived in Sandtown, Winchester, which was just to the west of downtown, if you can see my cursor, and you can see the disadvantage. Redlining and other forms of segregation and other forms of discrimination in other markets, you know today, you know one statistic – the poverty rate in his neighborhood is 40%. And you can also see the adverse impact on high blood pressure and life expectancy. The life expectancy in his neighborhood was 69 years, almost more than 15 years shorter than people in the healthiest neighborhoods. Redlining and other forms of discrimination can dramatically shorten lives. And the other thing that confronted Freddie Gray was lead paint poisoning. He had an extreme form of lead paint poisoning. When you can’t get loans for your housing stock, your housing stock deteriorates, and he had a severe cognitive deficiency. And when he was a young man, he was just hanging out on the street corner, and so cops approached him, and you get the history of policing in large cities in America, plus a cognitive disadvantage. The result was about one week later, Freddie Gray lost his life.
So today, these statistics are based on some excellent NCRC research, 90% well hold it six, about two-thirds of the neighborhoods characterized as hazardous are majority-minority today, so 63% so you can see how HOLC started a pattern over the decades of segregation and other discrimination that significantly disadvantages neighborhoods. You also have much less lending in those neighborhoods. You don’t really have a viable lending market. And we did statistics, we did research that actually measures there’s about twice as less loans per 100 housing units in formerly redlined neighborhoods.
So decades later, this is a success story of reinvestment. You saw the incredible disadvantage of disinvestment. But years later. Community Reinvestment Act is passed outlawing redlining. This is a map on the right that shows an FHA map, very similar to the Homeowners Loan Corporation, if you know Washington, DC, the red color, the red-colored areas are predominantly minority and to the west of downtown, or to the right of downtown, is a community called Anacostia, which was shaded red in 1940s but because CRA says you can’t do redlining, and because there’s housing nonprofits there are dedicated to creating affordable housing stock, on the left you have a homeowner named Sabrina Walls, who is a proud homeowner of a affordable condominium complex that was built by MANNA, which is a housing nonprofit in Washington, DC. This is what reinvestment does. It gives people a quality of life. People live and they acquire wealth, and this is just a statistic about MANNA, and a lot of these activities are helped by bank lending, you know that stimulated by CRA. I did a study when I briefly worked at Manna about more than 700 Manna homeowners the media, their median equity gain was $170,000 and these are people that didn’t have wealth before they owned a home so they could either go to college or send their kids to college or start a small business. Those in the homes the longest had a median equity gain of 576 five, almost half, more than half a million dollars. Sabrina Walsh herself is a single mother. She spent five years in Manna homeownership counseling. She worked really hard, so people are given a hand up, and they’re willing to work hard and play by the rules. CRA and the nonprofit sector gives people a fighting chance.
So I’m going to talk a little bit about, a little more specifically about CRA. Now, Congress passed CRA in 19177. It was, there was some incredible advocates in Chicago and other cities. But there was the mother of CRA is a woman known as Gail Cinkata, and her organization National People’s Action documented redlining in Chicago and was trying to prevent segregation or white neighbor white working class neighborhoods that would transition to communities of color because predatory lenders and predatory real estate agency agents would scare the whites to sell their homes and to and then the African Americans would buy the homes at a markup, and again, they would experience redlining. So Gail Cinkata created an interracial coalition to try to stop this, and one way to try to stop segregating segregation was to try to get banks to make responsible home loans in inner-city neighborhoods, that banks have an affirmative obligation to make loans in all communities. So William Proxmire, this is his definition of redlining, literally drawing a red line on a map and refusing to lend in those neighborhoods. And in the book, I described in chapter four how this legislation was passed, really an incredible story.
So how CRA works. The legislation, as I said before, requires banks to serve the community, serve the needs of all communities, and it mentions low and moderate-income communities, specifically. It talks about deposit and credit needs. And there’s a continuing and affirmative obligation, not just a one-time obligation, but a continuing and affirmative obligation. And the way that this affirmative and continuing obligation is enforced is that the Federal Bank agencies, again, there’s three of them, the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, they conduct exams once every two or three years and make sure that banks are affirmatively and continually making loans to low and moderate-income neighborhoods and low moderate-income people. So in addition to rating banks, the agencies are required to consider the CRA performance of banks when banks are at the beginning, when banks apply for charters, what is your CRA plan or deposit insurance, but also when banks want to open branches and when banks want to acquire other banks. In 1995, the federal agencies undertook a significant reform of the regulation that basically describes how the design of CRA exams for different types of banks, and this is largely, largely the examination regime today, with some tweaks in the early 2000s. Large banks with assets of about $1.5 billion and higher, have three parts their test, a lending test, the investment test and the services test. The lending is not only home lending, but small business lending. The investment test, for example, looks at low-income housing tax credits. That’s an investment to make affordable rental housing or affordable homeownership. And services, bank branches, but also deposit products. The intermediate banks have assets at around $400 to a little less than a $1.5 billion in assets. They have a streamline exam, which is a lending test, a retail lending test, and a community development test that has aspects of the investment and services test small banks that have assets that were a little less than $350 million or, I’m sorry, three $50 million it’s a retail lending test only. And wholesale unlimited purpose tests, you can think of like a credit card bank or wholesale bank that doesn’t do retail business, they just have a community development test. And I’ll talk about strategic plans in a little bit. So this is just an outline of the major events over the last 50 years or 48 years to be exact, of CRA. Passage of CRA in 1977. You know, I talk about National People’s Action and their successful advocacy campaign. But as well as Senator Proxmire, Robert Kuttner, who is still going strong, is a cutting-edge journalist. He was staff to Senator Proxmire, and he was one of the ones that wrote the original CRA language. And Calvin Bradford was an academic that was working with National People’s Action. I talk about him in the book as well.
1995 there was a major regulatory reform to CRA. I mentioned that earlier, 1999 major banking legislation called Grand Leach Bliley, which allowed banks, insurance companies and securities firms to merge. There’s more to it than that, but that’s the highlight. And back then, in 1999 I was already at NCRC. Our argument is okay if the financial companies are allowed to merge, they’re becoming more powerful. We need to extend CRA, or CRA-like obligations throughout broadly, throughout the financial industry, since they can own each other. CRA should be applied to insurance companies, securities firms, mortgage companies, as well as banks.
And then after Grand Beach Wiley, needless to say, CRA was not modernized. An opportunity was missed, but right at right on the heels of grand beach Wiley, I worked with members of Congress to introduce CRA modernization legislation in 2001 and then again in 2000 2001 and then again in 2009. There was another regulatory change in 2005 under George W Bush that created the category of intermediate banks, in addition to small banks and large banks. The industry called it streamlining. We thought it made CRA exams a little too easy for some banks. And then you fast forward again. It wasn’t a whole lot of action until the first Trump administration in 2020. There was a split among the agencies. This was relatively rare in a 48-year history of CRA, of the agencies actually implementing different CRA regulations and different exams. But it occurred in 2020 when the Office of the Comptroller of the Currency, that was then led by Joseph Otting, implemented a CRA regulation and exams that were different than the Federal Reserve Board and the FDIC. And I’ll talk about it a little more detail. No one liked it, neither the banks nor the community groups. And it was and this change, the OCC was repealed when the Biden administration, the first year in the Biden administration, when the Biden administration took office. And then a lot of you know that in 2023, there was another major CRA update to the regulation done on an interagency basis, the same regulation for the Federal Reserve Board, the FDIC and the OCC. I’m going to talk about it in more detail later. And sadly, I will tell you a little later, it’s not going to last, but it was a major regulatory change, and a lot of those components, hopefully in future years, we want to see them come back.
This slide gives you an overview of CRA ratings. There are four CRA ratings, outstanding, satisfactory, which are the passing grades. You can roughly think of outstanding as an A says factory is a B. Needs to improve andn substantial non-compliance are the two failing grades. And you can see on the left that you can’t even see the colors for the failing great ratings, unless you look really closely, you might see a little gray on the very top that needs to improve. Over you know, starting really around 2003 or the early 2000s, 98% of the banks passed on a yearly basis. The first few years when CRA ratings became public, 1990 10% of the banks failed, but that by 1995 that had changed to two or 3% of the banks. I’m actually a little more perturbed – the passage rate is probably too high, but I’m actually probably a little more little more perturbed about 90% of the banks in a satisfactory rating. And think about a classroom with students, or 90% especially a large college introductory course, so 90% of the students performing exactly the same. I think that maybe if they’re at five atings, and that 90% were cut were divided to two buckets like B and B minus, you would have more accuracy, you would have more nuance in your ratings, and those are getting b minus might want to improve to either a B or an A the next go around, because banking is a public reputation business. And imagine a bank going to a governor of a state and saying, Hey, I got to B- my CRA exam. Place your deposits in my bank, and we’ll do great things for your communities. More likely that a governor might be more persuaded by a bank with an outstanding rating. So that was one of the things that the 2023 before tried to address not only CRA ratings, inflation, but more nuance in the in the ratings on us on the right, I talk about, I described the grades by different categories of banks. You can see large banks get 20% of them, on average, get an outstanding rating. Small banks, it’s about 6 -8% similar to intermediate small banks. I’m making a case in the book that the large banks at 20% outstanding. I think is inflated, particularly on the leading on the lending test, because in some especially with in many cases, small and intermediate small banks actually have a higher percentage of home loans, small business loans to low and moderate income borrowers or low moderate-income communities.
So despite the great inflation and the lack of nuance of grades. I’m going to show you a slide in a little bit that CRA has been effective, and it’s even been effective when you consider the merger reviews, there’s almost no denials at all overall when banks want to merge, and very rarely, if ever, a denial on CRA grounds. Just to, you know, give you one statistic from this slide from 2018 through 2022 just one agency, the Federal Reserve Board, considered 494 merger applications, 455 approvals, one denial, just one denial. 24 withdrawals, which is kind of like a Do Not denial, because the bank kind of figures that the handwriting is on the wall and the right the application goes forward, it will probably be denied. We don’t know how many of those 24 withdrawals we really based on CRA grounds. Every once in a while, an agency conditions an approval. A merger application is approved, but it is made conditional upon specific improvements. And on the last bullet point on this slide, Renison, which was a bank based in Mississippi, they want to acquire Merchants and Farmers. And a lot of NCRC members commented on this application during the public comment period, and they documented through data analysis that the lending performance of Renaissance to low moderate-income people and people of color was indeed poor. So the FDIC required the bank to submit an improvement plan, and in future years, when you took a look at the HMDA data, the bank had indeed improved lending to low and moderate-income people. So even when there’s not a even when denial is based on CRA performance is rare. In some high-profile cases, if there are conditional, if there are conditional approvals, or I’m going to talk about community benefits agreements, benefits agreements. This can affect mergers industry wide, or several bank mergers, and you can actually get increases in lending for a certain time period depending on how rigorous the federal agencies are enforcing CRA.
This slide actually shows you that CRA has been effective, even with the weaknesses I mentioned. Just you know, just in the last few slides. There was a Philly Federal Reserve Bank study, and one of the economists documented when a when a census tract loses CRA eligibility, either because income has increased in the census tract or a map boundary is withdrawn, is redrawn, Lending Act can actually decrease by 10 to 20%. So CRA by pushing banks to continually and affirmatively meet their obligations can, you know, significantly increase lending, increasing lending. Even by 10% can make a difference between a viable lending market and a neighborhood that does not have a viable lending market. There was a federal reserve study that documented the same similar impact on small business lending. So why is this going on? Before CRA and there was redlining, banks would overlook profitable lending opportunities, safe and sound lending opportunities in underserved neighborhoods. So the economic term for this is CRA corrects for market failure by asking banks to work a little harder to identify profitable lending opportunities. So one reason for the CRA bump in lending.
So community benefits agreements. We used to call them CRA agreements. We changed the name to community benefits agreements because under banking law, when a bank merges, they are required to demonstrate how the merger is going to result in a community benefit, which is usually measured by a higher amount of loans or services after the merger. Community benefits agreements are not required by the CRA statute or the regulation, but they are a very concrete way for banks to demonstrate their community benefit, and they are literally plans for after the merger, that the two banks, merger merging, are going to make a higher dollar amount or percentage of loans to people of color, to low and moderate-income, people to underserved neighborhoods. And just to give you a sense of how these you know this, this is real dollars. Since 2016, NCRC and member organizations have negotiated CBAS with 22 banks for a combined $588 billion in mortgage small business lending and community development finance. And before NCRC was keeping systematic statistics on its activity in earlier years, I had documented literally trillions of dollars in CRA agreements or community benefits agreements. And Bostic and Robinson, to economists, they spent a summer in an NCRC conference room, and I gave him hard copies of CRA agreement. So it’s about 400 I think, at that time. And they documented between 1993 and 2001 that after and a CRA agreement, CRA-eligible lending was 65% higher by the number of loans, but this was only for like three years. You had to actually bump up – you actually had to renew the CRA agreement after three years if you wanted to continue the progress. What are the CRA critics say? The CRA critics say, oh, CRA is a trillion-dollar shakedown. Community groups call banks bad names during merger applications so the banks came and make these community benefits agreements. A lot of this lending, a lot of this lending is forced. It’s unprofitable, it’s not safe and sound. CRA caused the financial meltdown. Well, in one of these boxes, there was a lot of study about lending during the subprime era, during the era of risky lending, and these studies by Federal Reserve economists and others showed that bank CRA lending was only half as likely as CRA lending not covered by banks to go into foreclosure. In other words, the CRA, the lending done by mortgage companies, which is not covered by CRA, was much more likely to go into foreclosure. And that only 6% of the subprime loans during this time-period were made by banks in their assessment areas, and 94% of the subprime loans are made by other institutions and outside of banks assessment areas. So that I go through the book how I think that the CRA critics don’t get it right.
Now, the next couple of slides talk about the public participation in the CRA process. Actually commenting on CRA exams does not occur as often. It’s kind of hard. You got to do sophisticated data analysis. More common is participation during the merger application process and negotiation over CPAs. The more common form of community group activity on CRA is actually during merger applications, but also on a day to day basis. And this is very, very important partnership building with banks for doing housing counseling or lending programs or small business counseling or affordable rental development. So the partnership building is often overlooked, but CRA has created an infrastructure for lending and Community Development incredibly important over the last 40 years, and these are some of the heroes I talk about in the book.
Nimu Sakam on the left was at a hearing. On the west coast, he wants the CRA plan and public hearings. And the woman on the right is a proud homeowner of CRA-financed affordable homeownership. And in the book, I actually talk about case studies of public participation. Kevin Stein, advocating for multi-family housing and fighting displacement, med Guerra, doing farm worker housing in Oregon, housing counseling and lending and banking in Native American areas. I interviewed Dave Castillo, who’s on NCRC’s board.
So what are my recommendations for increasing public participation, make it easier for public, for the public to participate on CRA exams. I said it doesn’t happen that often, even trying to find out which exams are occurring is not easy. The agencies have tried to make it easier over time, but trying to find the list of CRA exams and the websites can still be a little hidden. I still think that can improve. It means it seems simple, but it’s actually very important. There is a part of CRA exams called performance context, and often these are very dull descriptions of census data. I think instead, examiners could present the statistics to community groups, and they’re talking to community groups about how banks are doing in their community. You know, what’s the amount of housing affordability as measured by rental cost burdens, either rental housing or homeownership? You know, is the particular neighborhood, particular metropolitan area, particularly unaffordable, and then talk to the community organization, is it everybody, or is it just certain populations, like family or senior citizens? I think those types of discussions could get really more at specific needs and make CRA exams more nimble in identifying specific needs, maybe lines of credit for nonprofit organizations when they’re doing affordable housing development, or there’s a greater need for senior housing in certain metropolitan areas. And also more and better data from agency websites, publicly available data, the home loan data, for example, is harder to get to now than it was 15 years ago, and ironically, the CFPB took over the data dissemination of the home loan data from the Federal Reserve Board. Some of those who may have been around for a long time, like me, may remember you could get actually Excel tables from a federal agency website that had, like, the number of percentages of loans to low- and moderate-income for homeownership lending to low and moderate income people, in say, Gary, Indiana, not you really can’t do that anymore. From the CFPB website, you have to download raw data, which a lot of people don’t want to or don’t have the time to analyze, either through Excel or through a more sophisticated data program. So better data is very important to comment on CRA exams and merger applications to increase the amount of participation. Make CRA exams less binary, it just seems like pass or fail. That’s like the major conclusion. But banks have a lot of differences in performance across metropolitan areas. They could get a barely passing grade like a low satisfactory in a particular area, and so talk about that more. The CRA exam should talk about that more and expectations for improvement section, and maybe they need to do better in financing housing for older adults and require improvement plans. There is something in the regulation of bank fails they have to indicate in its CRA public file, and anybody can get how it’s going to improve, but maybe where it’s gotten a low satisfactory rating. It gets grades on a state level, and also for multi-state metropolitan areas, a multi-metropolitan area that crosses two states, say, Cincinnati is an example. They get low, satisfactory or less on either a state or a metro level. Require an improvement plan subject to public comment. Less of a binary thing, increasing more opportunities for public improvement and more rigor in the process, which should increase lending in areas where banks need to do better. But how about public hearings for 50 of the largest banks, not only on mergers, but on CRA exams. This was actually an idea from National People’s Action in 1970s. I think it should be reconsidered. Thought it was a very good idea because a community organization is not going to do an analysis of 100 metro areas for like a large bank, but in a public hearing, can talk about needs in its area, which is also very important. Make commenting on CRI exams more possible by increasing the precision of the performance measures. Percentage of loans to low- and moderate-income people. How do you compare a bank to other banks to 2023 reform really had thresholds that were more precise in awarding a rating on, say, the lending test, whether it’s outstanding a high satisfactory or low satisfactory. The increased precision made it easier for community banks and banks to know, community organizations and banks to know what performance merited, what ratings, and actually that could probably facilitate more public participation. In the auditing reform in 2020, the CRA reform that was discarded, it was basically dying to boil down CRA to Just one ratio, the dollar amount of activities divided by the deposits of banks. And the reason why that’s not helpful is it could lead to banks seeking out the largest deals. Oh, like, let’s, let’s, let’s finance a bridge. And there was actually that could count under the 2020 OCC reform. And so that a lot of dollar amount, what does a bridge do in Queens or Brooklyn that really has needs for micro-finance, small business loans, smaller dollar amounts, but the ratio for the bank wouldn’t be as good if they focused on smaller types of financing, which was really needed. And I talked about the going more towards five ratings. There wasn’t five ratings in 2023 reform, but there was a scoring system that had points that made it more like five ratings.
Okay, mergers and public participation. The Federal Reserve Board had a footnote in merger approvals for years, and even still now it would say CBAs are not required by the CRA statute. Well, we know that, but having that as a footnote can kind of be a discouragement. Instead. How about a footnote just saying community benefits agreements are one way to demonstrate community benefits, not saying that they’re required, but it isn’t important in one way, one way to do this. So that I think would stimulate more community participation. There was some reforms to and I’m trying to, I don’t have enough time to do all this justice. I’m going to try to wrap up in a couple of minutes, there was some reform to the merger guidelines of the FDIC and the OCC and the FDIC, saying that commitments that could have been CBAs would have been monitored, possibly by the FDIC in future CRA exams. Did a bank comply with its commitments or its goals, but unfortunately, this is going to be rescinded in the next few months. Elections do have consequences. The FDIC and OCC also indicated that hearings, public hearings, would be more likely in the case of large mergers when the combined assets were more than $50 billion. But this, this is going to be rescinded in the coming months as well.
CRA sunshine was a is part of the 1990 grand leach Bliley. They were onerous disclosure requirements. I don’t have time to talk about it, but it was really, if it was implemented rigorously, it really could have had a chilling effect. The agencies adopted a policy of benign neglect. You can read about this in chapter six.
CRA and race. I don’t have time to do this justice. Very, very important, because you may remember redlining originally victimized disproportionately communities of color. CRA was passed in 1977 and without explicitly mentioning race, this was done because of the political environment. You may remember, there was a backlash against affirmative action even in the 1970s. And you know, I don’t need to tell you that the environment is not great today for doing for redressing racial discrimination. In 2023, community activists wanted to introduce CRA and race. We had one proposal to identify tracks that were underserved based on lending per housing unit, for example, you could actually identify certain traps. The agencies did not adopt this reform, but there is something similar in rural areas right now. So it doesn’t explicitly apply CRA to race, but a lot of understood tracks, but disproportionately communities of color. The CRA reform in 2023 did include consideration of special purpose credit programs, which are authorized under the Equal Credit Opportunity Act, which could target specific populations that you demonstrate through data analysis were underserved. But sadly, the 2023 form will be rescinded in the coming months. And one thing that was very important in 2023 regulatory reforms is there is a lot of lending activity because of the internet and also because of the use of brokers beyond areas where there’s bank branches. So the 2023, reform identified retail lending assessment areas where, for example, there was 150 home loans, but they may not have been a bank branch there. And a lot of us think that the legislation in statute creates opportunities to do this. That even in 1977 there was not just confining it to where bank branches were, because in the passage of the legislation, there was even talk then about national-level banks. How can you confine us to the bank branches? And even the American Bankers Association was saying that. And actually, when CRA was passed, they actually dropped something that was in the draft legislation loosening a requirement for a ratio in an area where there was bank branches. So even going back to 1977 we thought that there was room for the regulators to identify assessment areas beyond bank branches.
I think there’s a case for applying CRA beyond banks, insurance companies, securities firms, mortgage companies. You can read more about it in the book ,and even to other industries like nonprofit housing, and there are community benefits agreements discussed whenever say, there’s a sports stadium that’s being built. There’s even some discussion about that in Washington, DC, for the commander’s football stadium. And the last thing I’ll mention is that the 2023 regulation will be rescinded in the coming months. This was a body blow, because there are some of us like myself who had been advocating for these types of reforms for 20 or 30 years, it is now going to be rescinded. But you know what a lot of advocates do is you’re sad for about a day, and then you dust yourself off and you keep advocating. And though we don’t, we don’t like where CRA is going to be in terms of the legislation or regulation right now, there can still be a lot of good done through CRA practice on a daily level, talking to banks, designing programs and also community benefits agreements. So I am going to stop there. Thank you so much for your attention.
Petrusz 48:10
Thank you, Josh. We have a couple of audience questions that I would like to start the Q and A portion with. First question I want to start with is, what do you see as a strategy to support CRA given that it is under attack by the current administration?
Silver
Wow, that’s a very good question. One thing you do is you document its benefits. NCRC’s Research Department, I’m not giving its work, because there’s already been discussion about this, but they’re going to document in a data-driven way. CRA benefits, by metro area, by, you know, rural county. But also do this in your in your community. There was a, it was a board member, Shelly Sheehy. She was based in Iowa, and there was a moderate Republican, Jim Lynch, who just recently passed away, great, great guy. And he was originally a CRA opponent. But what did Shelley do? Shelley walked Representative Leach, literally around neighborhoods and pointed to the congressman, the affordable housing developments, the small business incubators. So guess what, Representative Leach went from an opponent to a supporter of CRA. So do this with your Senator, your local congressman, and also state and local officials. There’s nothing about concrete benefits that can demonstrate its importance and hopefully bolster it even during these times. And banks are supporters as well. There’s a CRA infrastructure. There’s a lot of people in banks who do CRA. They believe in CRA it’s their job to improve the CRA performance of banks, and they will defend CRA. So work with banks that are also defending and promoting CRA.
Petrusz 50:14
Thank you. We’ve also had a couple of questions about state level CRA statutes. Josh, what are your thoughts on state-based CRAs, do you think those efforts will gain momentum, given the federal outlook right now?
Silver 50:32
Very possibly, it’s not easy, but it happens. There is a couple of states that have had CRA for decades. Massachusetts was one of the first, and Massachusetts applies CRA to credit unions, and it shows it’s very feasible to do that. NCRC has been a proponent of applying CRA to mainstream credit unions. CRA, Massachusetts also applies CRA to mortgage companies. New York State just expanded its law to also apply not only banks, but to mortgage companies. And Illinois passed CRA on the state level a couple of years ago for banks, mortgage companies and credit unions. And right now, there’s a bill in California. So one thing that’s very important is applying CRA to non bank financial institutions. And states can show that this can be done in a beneficial manner for communities, in a feasible manner for financial institutions. I tried this in Maryland with Marceline White of Economic Action. We did not succeed. California is on its second try, but it has gotten through a legislative committee, which is a big deal. So go for it. I think it’s very state-level CRA is very important.
Petrusz 51:53
Thank you. We have about six minutes left, so I want to ask one more question, but also wanted to ask Josh there are about 12 questions in the chat, and wanted to see if you’d be willing to put your email address in the webinar chat, in case people want to follow up with you after today’s webinar. But
Silver 52:23
Actually, what I’ll do is you see at the website at endredlining.com I will direct people there. And on the website, there is an email that you can you can email me, and I would do my best to answer questions. And, you know, I sorry I didn’t leave enough time for questions. I always like robust Q and A, oh,
Petrusz 52:43
Let me at least get one or two more questions in. I’ll go back to the first question we got. Has you seen evidence of CRA being effective in driving investments into community-owned real estate projects such as housing co-ops?
Silver 53:16
Oh, yes. I mean Community Land Trust Co Ops. Mana has done a lot of co ops over the years, you know, supported by bank lending, you know, CRA eligible lending. So the short answer is absolutely. And you know, you should document those in your community and share those with your elected officials and other stakeholders too, right?
Petrusz 53:42
I will close with one more question, Josh, given your your decades of service to the CRA movement and the fair lending movement, you know advocacy is a marathon. It’s not a sprint. Do you have any advice for people who are starting out as advocates, or have been in the space for a while and are possibly exhausted. What are some tools that you recommend for staying resilient and continuing the work?
Silver 54:16
Well, we are living in unprecedented times in America right now. I’m not going to try to make an overtly political comment, but you can probably see where my leanings are, but things are happening in this country that have never happened before, and it’s an exhausting time period, but I think that no matter how bad things get I am maybe naively but internally optimistic, and I’m just wired to be an advocate. You know, I had some disadvantages growing up. I had a learning disability and a speech impediment, and guess what? I wrote a book six decades later. If you work hard, you can overcome. But because I had disadvantages, that’s what made me empathetic and want to work in this field. And CRA is an incredible thing. It fights discrimination by empowering victimized communities, and it has done incredible concrete things. You can document these things in a very concrete way, and it’s very exciting. When you give a homeless person a place to live, a decent place to live, when you give somebody homeownership for the first time, you know that they’re first generation homeowner. When you help a woman become a first-time small business owner. These things you know, bring tears to your eyes, and that’s what CRA does, and that, you know, just just grab the pot, grab the possibilities. And to me, that’s what inspires me to keep going forward on CRA, and also other types of advocacy that I do on a daily basis.
There’s no magic thing that you drink or any other way to keep going. But you know, Harriet Tubman would say, you know, the leader of the Underground Railroad, she escaped slavery, and she helped lots of other slaves escape. When you hear that, when you hear the dogs barking in the forest coming after, you keep going. When you see the torches in the forest, keep going. And I think that type of inspiration, you know, helps me to keep going. People in much tougher situations, kept going. And I think we can, we can keep going to.
Petrusz
Thank you. Well, I think that was those were perfect words to close out the webinar today. Thanks again everyone for joining us. Please keep an eye on our website, ncrc.org/events, for future events and reach out to us about membership, save the date for our 2026 Just Economy Conference, which will be taking place on April 14 and 15 next year, as well as Hill Day, which will be April 13. And we will see you all then, thanks again.
