[ad_1] Despite being outlawed over 50 years ago, redlining still persists in America. Now the country’s signature law to stop redlining is under review. Redlining is a five-alarm word in the lexicon of American racism, but it really has a quite specific definition: The denying of credit in non-white, particularly Black neighborhoods. The federal government was for redlining before it was against it, instituting color-coded maps of fast-changing metropolises for the better part of the 20th Century. And redlining is very much still around. How much? The racial homeownership gap is now wider than it was in 1890. What is not widely known is the role federal banking regulators play in letting this practice continue. The main law policing redlining is the 1977 Community Reinvestment Act, or CRA. These bank regulators only enforce the CRA when banks seek a merger or acquisition. The broadly written 1960 Bank Merger Act, which President Joe Biden’s administration wants strengthened, also requires banking regulators to consider a merger’s impact on the community. But the federal government’s merger review process is, at the end of the day, a formality, if a sometimes time intensive and messy formality. The three agencies in charge of such reviews — the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency — have not denied a single bank merger in 15 years. And if these agencies were to find that a merger ran counter to public interest because of a bank’s discriminatory lending practices, it’s not likely anyone would know about it. Like the waitstaff at a country club to a patron whose card was declined, regulators alert banks, often in phone conversations, of the potential for a denial, well before any public exposure. Banks then quietly withdraw their application, rather than face a public denial. Ostensibly, the Biden administration has reversed decades-long executive branch indifference to the CRA. Senior administration officials claim that rooting out “modern-day redlining” is a top priority. In a joint news conference last September, officials at the Consumer Financial Protection Bureau, the Department of Justice and the OCC proclaimed a crack down on “digital redlining.” And in a March interview with former president Bill Clinton, Department of Housing and Urban Development Sec. Marcia Fudge, called attention to the continued practice of redlining. “We still have redlining in this country,” Fudge said. “We are looking at where we have failed with the CRA, and we know we have.” Calvin Bradford, the principal of Calvin Bradford & Associates Ltd, and one of the authors of the original Community Reinvestment Act of 1977. Photo provided by Calvin Bradford DOJ and CFPB can bring lawsuits against alleged housing discrimination. And HUD can bring lawsuits claiming bias in mortgage lending. These agencies, though, do not have a seat at the table when banks, during a CRA exam or undergoing a merger review, provide a voluminous account of their lending practices. They cannot, in other words, do what the Federal Reserve, OCC and FDIC can do: Compel depositories to catch up to nonbank lenders in their minority loan practice. Indeed, depositories’ mortgage lending to minorities is far behind that of nonbanks, a cruel irony since nonbanks do not have community reinvestment obligations. With bank regulators reluctant to wield their power, community groups often take up the mantle, but with mixed results. Such inaction is of great frustration to fair lending advocates and also longtime experts on the issue, like Calvin Bradford, one of CRA’s original authors. “It’s white, male and fairly racist all the way through. There haven’t been women involved in high levels of the [banking] agencies, and no minorities, until fairly recently,” said Bradford, presently the principal of Calvin Bradford & Associates Ltd. “It’s been a racist part of the government that doesn’t care, because its view was: if you’re going to make safe loans, you should make them to white people.” The CRA, then and now For more than half a century, the federal government has been officially trying to atone for its role in redlining, which by one estimate cost minority communities $156 billion in equity. Congress passed the Community Reinvestment Act 45 years ago amid public outrage that discrimination in lending had endured, even after enactment of the 1968 Fair Housing Act. But there was a catch. Nowhere in CRA is there mention of race. This is in contrast to The Fair Housing Act, which directs banks to both not discriminate and further housing opportunities to groups who faced historic prejudice. Instead, the law required federal agencies to assign banks one of four grades based on the curve of how the bank’s lending to low- and moderate-income borrowers compared to their peers. The law also required banks to lend within their communities. In other words, a bank based in Philadelphia, where the plurality of the population is Black, should invariably lend to Black borrowers. Housing and Urban Development Secretary Marcia Fudge Fast forward to today, and there are questions about whether CRA gave precise enough guideposts. For example, researchers at the Urban Institute found that low and moderate-income is a poor proxy for people of color. The law’s ambiguity on some matters may have been deliberate. “[Dem. Sen. William Proxmire] was good at counting votes, and this just squeaked through,” said Bradford, of the then-chair of the Senate Banking Committee. “He knew it wouldn’t if we put race in.” “As a politician, he was right,” Bradford said. “But communities were right that not putting it in allowed people to find this escape valve of low and moderate-income.” Perhaps as a result of this race-neutral stance, even banks that the DOJ accused of redlining pass their CRA exams. “For banks that have a satisfactory CRA score, it’s still possible for those same institutions to face public scrutiny for redlining actions,” said Jason Keller, a CRA consultant at Wolters Kluwer who previously spent 20 years at the Federal Reserve Bank of Chicago. Trustmark Bank, for example, settled charges of redlining
