California Attorney General Rob Bonta led a coalition of 19 attorneys general in a comment letter in support of a joint effort by the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency to revise and strengthen regulations under the Community Reinvestment Act (CRA). The CRA is a critical civil rights law enacted by Congress to prevent racially discriminatory redlining in housing, and encourage banks to help meet the credit needs of all segments of their communities, including low- and moderate-income (LMI) neighborhoods and individuals. In the comment letter, the coalition expresses its support for the federal agencies’ proposed rule, and urges them to go even further in implementing reforms to help tackle persistent racial and economic disparities exacerbated by COVID-19.
“For too long, lower-income Californians and people of color have been denied fair access to credit to buy a home or open a business,” said Attorney General Bonta. “While the Community Reinvestment Act works to protect communities by directly addressing the ongoing legacy of redlining and racial inequality in our financial system, it’s critical that we strengthen it. Through this regulatory process, we have a once-in-a-generation opportunity to help ensure that our institutions are able to better serve the financial needs of all Americans. I urge the federal government to take every step necessary to ensure that we have all the available tools to tackle the persistent threat of systemic discrimination and support the well-being of our families and neighborhoods across the country.”
Since the CRA was passed by Congress in 1977, it has helped direct trillions of dollars in investments back to LMI communities, increasing access to financial services and loans that incentivize the availability of affordable housing and support small businesses. In the comment letter, the coalition supports many aspects of the proposed rule and proposes additional measures to help ensure that regulators have the tools they need to carry out CRA’s imperative — that financial institutions be required to address the needs of the most vulnerable communities. This imperative has never been more important. In prior comment letters, the states expressed concern that the widening racial wealth gap stemming from historical redlining would be exacerbated by an uneven pandemic recovery. Now, two-and-a-half years into the COVID-19 crisis, the states face an affordable housing crisis, increased homelessness and housing insecurity, and historic levels of inflation that disproportionally threaten low-income communities and communities of color. CRA regulatory reform can play a key role in responding to these challenges.
Accordingly, in the comment letter, the states encourage the agencies to focus on:
- Ensuring that the rulemaking vindicates CRA’s core purpose to address racial inequities;
- Raising the regulatory bar to ensure that banks are taking meaningful action to meet LMI community needs; and
- Leveraging incentives to encourage affordable housing development for LMI communities without displacement.
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