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**MAY 6, 2022**
Kuttner on TAP
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**** Better Rules for Community Reinvestment
Biden's progressive regulators act to put new muscle in an old law.
The Community Reinvestment Act of 1977 was one of the last pieces of
progressive financial regulation to pass Congress before the political
tide turned disastrously in favor of deregulation. CRA was the offspring
of the anti-redlining movement. It not only prohibited redlining but
required banks and thrift institutions to take affirmative steps to show
that they were investing in communities they were chartered to serve.
And the law had teeth. If a bank got a low CRA score in periodic
examinations, it could be denied certain things that it wanted, like
branches or mergers.
CRA is also a community organizer's dream because it creates leverage
for community groups to make demands on banks, and then organize around
the demands. Thanks to CRA, a whole subset of bankers internalized its
values and specialized in community development lending, and the process
caused more credit to flow to low-income and minority communities.
I confess a certain fondness for CRA because I wrote it. But that was
only because I was in the right place at the right time, working as an
investigator for the Senate Banking Committee under its great
progressive chairman, William Proxmire. The concept came from a
coalition of community groups.
Fast-forward several decades. Republican administrations kept trying to
weaken it. Democrats kept it alive. Despite explicit language in CRA
requiring lending consistent with sound banking standards, the wise guys
on Wall Street and their allies in government invented new predatory
strategies such as the subprime scam. And the damage done by subprime
more than wiped out decades of progress facilitated by CRA.
Now, Biden's progressive regulators, led by FDIC's Martin Gruenberg,
Rohit Chopra of the Consumer Financial Protection Bureau and a member of
the FDIC board, and Governor Lael Brainard of the Fed, have proposed new
and ingenious regulations
to enhance
the reach of CRA.
Among other requirements, these rules would give lenders CRA credit for
investing in low-income communities to address climate change.
Lenders would also be required to demonstrate that their loans to
lower-income communities actually served low- and moderate-income
people, rather than promoting gentrification. Some fake forms of income
targeting, such as so-called enterprise zones, merely reward location
rather than the target population. Purported loans to small businesses
would get closer scrutiny.
As the
**Prospect** keeps pointing out ,
even without a reliable working majority in Congress, this
administration has a lot of power to help people via executive action.
The new CRA draft rules, which are due to be finalized in August, are a
fine example.
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~ ROBERT KUTTNER
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...
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revelations in its blowout profiles? BY ERIC ALTERMAN
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