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CRA “Reform” Is an Attack on Communities of Color

At a time of record profits for banks and record wealth and income inequality in the U.S., a strong CRA is critical to reaching economic equity for the working class and people of color.

 "Expect so-called regulatory “reform” to remove the incentive for powerful bank investments into low-income communities and communities of color." (Photo: Andrés Rodriguez)

"Expect so-called regulatory “reform” to remove the incentive for powerful bank investments into low-income communities and communities of color." (Photo: Andrés Rodriguez)

By this point, it’s no secret that the Trump administration is in open warfare with communities of color, the working class, and regulations that safeguard our interests. Now, it seems, they’re coming after the Community Reinvestment Act – CRA for short.

CRA, a civil rights law passed by Congress in 1977 to address redlining, is reportedly next on the administration’s hit list. The effects of redlining — the refusal of banks to lend and invest in communities of color and low-income areas for decades – linger today. By enacting the CRA, Congress acknowledged that redlining was a pernicious problem that required long-term corrective actions: a mandate that banks lend to the working class, and that regulators evaluate banks for compliance.

Why a major revision to the CRA is bad news

Forty-one years later, the Trump administration’s pledge of a major revision to the CRA means they plan to weaken the law as part of the administration’s broad hostility to regulations that protect working people and consumers. Expect so-called regulatory “reform” to remove the incentive for powerful bank investments into low-income communities and communities of color.

Harmful proposals on the table include changing how banks are rated on their CRA exams and whether community development activity should include loans and investments to businesses and infrastructure projects in wealthy areas, as opposed to only low-to-moderate income areas, as was originally intended.

Although they have done much good (more on that below), the CRA and fair lending laws have not eradicated redlining or racism in lending. Forty years of civil rights laws is not enough to correct over 200 years of deep-rooted racism, or the racial wealth gap white supremacy created. This is not a colorblind country, and an administration that ignores facts and pushes for deregulation isn’t helping.

At a time of record profits for banks and record wealth and income inequality in the U.S., a strong CRA is critical to reaching economic equity for the working class and people of color.

Benefits of CRA

In its 40 years of existence, the CRA has made great strides in revitalizing communities. Since 1996, banks covered by the CRA have invested more than $980 billion in historically underserved zip codes through loans, investments, and philanthropy. These major investments have spurred affordable housing developments, small business development, job creation, social services and neighborhood stabilization. By incentivizing economic inclusion through a range of investments, the CRA helps close the racial wealth gap by making homeownership, entrepreneurship and even basic banking services more accessible to communities of color.

In addition to tackling the U.S.’s historical disinvestment in low-income communities, the CRA opened the door for community advocates to push banks and regulators to create tangible wealth-building opportunities for our communities, and that door must remain open.

Call to Action

In anticipation of Treasury’s recommendations that will likely weaken the CRA, we need your voice. Please reach out to the U.S. Treasury and your Congressmember in support of a strong CRA (resources below). In response to Treasury’s announcement, The Greenlining Institute submitted a letter with recommendations to preserve the CRA’s mission, and build on its successes. Please feel free to use the contents of our letter in your call.

Make no mistake about it: a diminishment of the CRA and the economic development it inspires will disproportionately fall on the shoulders of communities of color. An administration suspicious of communities of color and the working class cannot be the gatekeeper to economic opportunity.

Contact Info for Treasury and Congressmembers:

Department of the Treasury, (202) 622-2000

Click here to find contact information for your members of Congress.

This post also appeared on the blog of the Greenlining Institute.

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Sharon Velasquez

Sharon Velasquez is Greenlining’s Economic Equity Manager. Follow her on Twitter.

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