Morning Brew, October 2, 2020, Regulators Propose Changes to 1977 Community Reinvestment Act
The Federal Reserve seeks to make adjustments to the Community Reinvestment Act adopted in 1977. These adjustments have brought criticism for the possible emphasis on Banks total value Investments which some fear may incentivize banks to only make a few big loans rather than spread credit out amongst the community. The main drawl back to these adaptations is that is would allow banks to partake in the bare minimum and ultimately halt the advancements in community equity.
A few weeks ago, the Federal Reserve asked the public for feedback on proposed tweaks to regulations under the Community Reinvestment Act (CRA), a 1977 law that encourages bank lending to lower-income communities.
Don’t get fooled into thinking this is a regulatory snoozefest. Changes to the CRA could put hundreds of billions of dollars for community development at stake.
nder President Franklin D. Roosevelt, the government-backed Home Owners Loan Corporation (HOLC) literally took red pen to paper and labeled Black and immigrant neighborhoods as “high-risk” for lenders. That practice, known as redlining, effectively created a “state-sponsored system of segregation,” Color of Law author Richard Rothstein told NPR.
The Federal Housing Administration wouldn’t insure loans in redlined areas, and banks and other private financial institutions cut residents off from loans, mortgages, and other lines of credit.
