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Economy Remix: Will New Federal Bank Merger Rules Have Teeth?

Welcome to the Remix, as we take our latest spin around the economy. This Remix column examines the world of banking and its intersections with community reinvestment and community finance.

Last month, I attended the annual conference of the National Community Reinvestment Coalition (NCRC), which attracts over 1,000 community reinvestment advocates from across the country. NCRC was founded to oppose redlining and ensure enforcement of the Community Reinvestment Act, better known as CRA. But in the 1990s, as federal support for CRA was solidified, there was also an informal deal of sorts struck.

CRA, as most folks who follow banking understand, is most important when banks merge. Mergers require hearings and regulatory approval, so mergers are times when activists can insist that merged banks invest more resources into historically marginalized communities in exchange for getting community support and regulatory approval. And deal-making between activists and banks thus became the norm.

Over the years, many such deals have been negotiated—and, without a doubt, some investments that would not have been made without those deals did get made because of them. In fact, such deals are often touted at NCRC conferences, with the community groups that negotiated them recognized on the conference main stage.

There is only one problem: if you ask if economic inequality is falling or if the racial wealth gap is narrowing, the answers are, to say the least, dispiriting. And so, this year’s NCRC conference was different. Instead of touting the latest deal, the focus was on stopping a proposed merger between Capital One and Discover. And regulators from both the Federal Deposit Insurance Company (FDIC) and the Consumer Financial Protection Bureau were responsive—and spoke plainly about the need for stricter regulatory review that didn’t just look at the effect of mergers on competition, but on the effects of mergers in meeting the “convenience and needs” of communities.

The change marked a big shift in tone from past conferences. It may mark, in fact, a growing recognition that to achieve meaningful shifts in economic and racial justice requires structural changes in how the financial industry operates.

In reading this article, I encourage you to consider how we got to the state of the financial industry today and what must change to advance economic and racial justice.

Until the next Remix column, I remain

Your Remix Man:

Steve Dubb

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