East Bay Housing Organizations Issues Public Comment on Comptroller of Currency Proposed Rule
The comment was co-signed by
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East Bay Housing Organizations (EBHO) strongly opposes this Notice of Proposed Rulemaking (NPR), which threatens both the letter and the spirit of the Community Reinvestment Act (CRA).
Since its passage in 1977, this landmark civil rights legislation has leveraged a significant volume of loans and investment for low- and moderate-income (LMI) communities and communities of color.
Indeed, since 1996, banks have loaned almost
Most equitable development advocates agree that the CRA needs to be updated and improved. But the
The
EBHO is a non-profit, member-driven organization with over 500 organizational and individual members. For 35 years, we have worked to preserve, protect, and create affordable housing opportunities for low-income communities in
Affordable rental housing is one of the most acute needs in
Further, the
It is not just affordable housing developments that will suffer as a result of these changes. It is also vital community development activities like education and advocacy. Over our 35 years in operation, EBHO has met with large-scale lenders to discuss the need for affordable housing in all of the
Uniting all of these practical considerations is an overarching moral concern that the proposed rules threaten the primary purpose of the CRA--to end financial redlining. The CRA was meant to recognize and remedy the historical fact that, when left to their own devices, banks excluded and exploited LMI communities of color. Specifically, in racially segregated neighborhoods, they would take money from depositors but would not provide conventional loans or other fair and affordable financial services. If people of color sought to improve their situation by moving into a more privileged area, then banks--along with racially motivated residents, realtors, and local officials--would maintain segregation by refusing to issue a mortgage in White neighborhoods. This stripped assets from communities of color, keeping them mired in poverty, and used those assets to underwrite loans and investments in Whites-only neighborhoods. This contributed to our country's unjust racial wealth gap. In the
It is not only the regulatory, but also the moral, imperative of the CRA to correct for this historic harm. By connecting a bank's regulatory standing to its positive community impact, the CRA has made significant strides toward repairing this legacy of segregation and wealth extraction. But as profit-driven corporations, banks do not do this out of a sense of public obligation. They do it because the regulations and incentives of the CRA encourage them to. The new rules, however, would completely undermine this system of carrots and sticks. It is only reasonable to suspect that banks, in turn, will go back to their old ways. Most advocates agree that the CRA needs to be improved. But this would not improve the Act; it would eviscerate it.
Take, for instance, the proposed "one-ratio" measure for evaluating banks. Under the current system, regulators are required to take a close and specific look at a bank's lending, investing, and service activities in order to evaluate its fairness and community benefits. The one-ratio rule, on the other hand, would replace a qualitative method with a quantitative one--treating all financial activity as equal without regard for its real impacts on LMI people and communities. This, as mentioned above, will encourage banks to forego more difficult, but also more needed, deals in favor of those that are easier and more profitable. For instance, the
The one-ratio measure threatens to render the CRA incapable of holding banks accountable to local needs. The CRA statute requires that banks "have continuing and affirmative obligations to help meet the credit needs of the local communities in which they are chartered." The key word is local. One ratio cannot tell a bank, regulator, or member of the public how responsive a bank is to its various service areas. The CRA exam currently evaluates a bank's performance in each of its "assessment areas," or areas where it has branches. This is critical to allowing local community members to weigh in on the bank's role in their area. The one-ratio approach, by contrast, would undermine community protections and input by evaluating a bank across the nation as a whole. Specifically, the
Rather than retreat from civil rights, CRA reform should go even further to address our nation's historic and ongoing inequities. The members of
We urge the
Sincerely,
Rev.
East Bay Housing Organizations
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The proposed rule can be viewed at: https://www.regulations.gov/document?D=OCC-2018-0008-1515
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