In an era when public and private institutions are finally acknowledging the generational economic harms to Black people by racist financial practices, the federal government has just missed a prime opportunity to advance economic justice.
On October 24, new guidelines to the Community Reinvestment Act (CRA) were issued. This landmark legislation was enacted in 1977 to address systemic inequities in access to credit and financial services, and has been critical in the fight against redlining and opening access to capital for low- and moderate-income (LMI) communities. The CRA uses the power of three institutions – the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation – to encourage federally insured banks to meet the credit needs of the communities in which they do business.
Our nation still struggles with stark racial disparities in homeownership and wealth accumulation. While 75 percent of white Americans have a home to call their own, only 46 percent of Black Americans can say the same, and the average white household holds wealth almost eight times that of its Black counterpart.
The recent revisions are aimed at strengthening and modernizing the CRA to reflect the changing landscape of banking in the digital age. But they lack the depth and muscle needed to meet the CRA’s goal of truly closing racial economic gaps.
The new CRA rule, for example, mandates transparency by compelling large banks to disclose home mortgage loan data, segmented by borrower income, race, and ethnicity. But this disclosure, in its current form, lacks the bite to challenge the status quo. It does not encompass a thorough examination of lending practices to address redlining concerns, nor does it hold the banks accountable for potential disparities evident in the data. This could have been a pivotal moment to radically reshape the narrative for Black Americans in their pursuit of homeownership, but it feels as though we’ve stopped short of making that transformative leap toward racial equity.
Furthermore, federal regulators had the opportunity with this CRA update to mandate data about race and ethnicity across a broad spectrum of lending beyond mortgages, which has profound implications for Black communities – but they did not. These elements held the potential to be our frontline tools in confronting and breaking down racial disparities from the ground up, yet this tentative approach does not resonate with the transformative steps we had hoped for. While there are certain complexities in gathering all this data, waiting for every star to align before taking action seems a timid approach for agencies tasked with ensuring equity.
Finally, it seems as though the regulators are missing a crucial piece of the puzzle by not including data on the racial and ethnic identities of those benefiting from community development activities. The regulators’ caution, prioritizing logistical concerns over potential transformative impacts, is misaligned when our times demand bold action. We might have just lost an opportunity to deeply assess if, and the extent to which, our efforts genuinely uplift those they are meant for and if they are making a real dent in narrowing the racial divide.
By incorporating explicit racial equity mandates into the CRA final rule, regulators could have sent a powerful message, directly challenging the age-old lending biases that have persistently blocked Black Americans from the path to creating generational wealth. And as the reverberations of these regulatory choices linger, we are left wondering: Had the government pushed further, might we be nearing a moment where Black Americans would finally be on a level playing field in their pursuit of homeownership and wealth?
As we grapple with the intricacies of the revised CRA, the spirit of its original intent cannot wait; we must fervently challenge and expand what we believe is possible. Racial equity in banking is imperative, and only with unwavering dedication and collective action will we establish a financial system that genuinely represents everyone. Let this moment serve as a catalyst for change, inspiring us to redouble our efforts in the pursuit of a more equitable society where the dream of wealth accumulation and financial security is within reach for all, regardless of their race or ethnicity.
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