Wall Street Journal: Shake-up considered on how banks lend to the poor

Wall Street Journal, April 27, 2018: Shake-up considered on how banks lend to the poor

A Trump-appointed federal bank regulator has suggested changing rules designed to encourage lending to the poor based on the location of a bank’s physical branches, a change opposed by community groups.

People familiar with the matter said the Office of the Comptroller of the Currency privately sought other regulators’ input on eliminating the concept of geographic “assessment areas”—or areas where banks have branches or other offices—when deciding whether banks comply with the 1977 Community Reinvestment Act.

It isn’t clear whether other regulators will go along with the comptroller’s idea or if the agency will formally propose it. Community groups that work on affordable lending issues worry it would reduce incentives for banks to lend in poor areas.

The CRA “is designed to respond locally, to ensure that deposits made by residents of a community are available for loans to people who live and do business in that community,” Jesse Van Tol, CEO of the National Community Reinvestment Coalition of community groups, said in a Friday statement. “Doing away with assessment areas completely would undermine the original intent of the law.”

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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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