Karl Renney
As we celebrate nearly six decades since some of our nation’s most history-defining civil rights legislation came into being, we have a unique opportunity this year to positively impact affordable housing, community development and small businesses.
Fifty-nine years ago this month, over 250,000 people crowded in front of the Lincoln Memorial for the March on Washington for Jobs and Freedom. Less than a year later, Congress passed the landmark Civil Rights Act of 1964 outlawing discrimination in public accommodations, including restaurants, hotels and motels, ending the era of legal segregation in those places.
Voting rights passed in 1965 and fair housing in 1968 with President Lyndon Johnson declaring, “Now, with this bill, the voice of justice speaks again. It proclaims that fair housing for all – all human beings who live in this country – is now a part of the American way of life.”
Darrell Byers
Title IX passed in 1972 prohibiting sex-based discrimination in schools and further legislation in 1973 and 1975 protected individuals from discrimination because of disability and age respectively. In 1974, the Equal Credit Opportunity Act was passed.
And then, in 1977, President Jimmy Carter signed the Community Reinvestment Act, pushed by a nationwide movement against redlining, the practice of withholding financial services to individuals based on the demographics of the neighborhoods where they reside.
CRA Is a Civil Rights Law
The CRA is fundamentally a civil rights law. Its sponsor, Sen. William Proxmire (D-WI) said as much on the floor of Congress.
“The data provided by [the Home Mortgage Disclosure Act passed in 1975] remove any doubt that redlining indeed exists, that many credit-worthy areas are denied loans,” he said.
However, it is a civil rights law that doesn’t mention race but instead, insufficiently attempts to use income as a proxy.
Earlier this month, our organization of bankers and community activists called on federal regulators to correct this wrong from nearly a lifetime ago. We said regulators should include race and ethnicity as part of a rewrite of rules implementing the CRA and do it now as they are considering the first significant update to those rules since 1995. Using our unique voice, representing both banks and community groups, we offered these comments with the intent of helping narrow the significant racial wealth gap that exists in the United States and here in Massachusetts.
Our bank members have a long record of service to low- and moderate-income neighborhoods and communities of color. Many of our member banks have made specific and expansive commitments to racial equity over the last two years. However, we also acknowledge our industry’s failure to meet other responsibilities to communities of color. Persistent racial disparities in lending should compel federal banking regulators to explicitly incorporate race and ethnicity in CRA exams.
Add an Incentive to Be Outstanding
The CRA statute requires the agencies to “assess the institution’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution.” Since communities of color are part of the entire community and nothing in the statute prohibits the evaluation of lending by race and ethnicity, this would seem to be an ideal opportunity for the regulations to speak to the importance of serving communities of color as a distinct part of the entire community.
While CRA does examine service to low- to moderate-income people and communities, low- and moderate-income neighborhoods and communities are far from the same. Nearly two-thirds of low- to moderate-income households are white, while nearly 40 percent of Black households and more than half of Hispanic households are not low- to moderate-income.
We are also using our voice to make an “outstanding” CRA rating worth it for those institutions that devote substantial resources to ensuring they are truly meeting the credit needs of all communities. In Massachusetts, 20 percent of banks have a most recent rating of “outstanding,” twice the national average. We attribute this to the effort our banks put into compliance and to the robust, community-based nonprofit network that partners with these same lenders.
Let’s create an incentive to achieve an “outstanding” rating. Regulators might consider lower borrowing rates at the Federal Home Loan Bank advance window with an emphasis on enhancing lending for economic development and affordable housing development initiatives for low- and moderate-income communities. It would help lenders with lowering borrowing costs and their communities in the form of community development loans that are more affordable.
Together, these reforms will create a Community Reinvestment Act designed to address our long history of racial disparities and discrimination while incentivizing lenders to reach higher and redouble their efforts to ensure all Americans have financial equity.
Darrell Byers is CEO at Interise and vice chair of the Massachusetts Community Banking Council. Karl Renney is senior vice president and CRA officer at Eastern Bank and chair of the Massachusetts Community Banking Council.
