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Better Markets Urges the Federal Reserve to Improve and Modernize the CRA

On February 16, 2021, Better Markets filed a comment letter on a Federal Reserve Advance Notice of Proposed Rulemaking on the Community Reinvestment Act. The CRA is a crucially important piece of legislation designed to ensure that historically underserved communities have access to credit and banking services . The Federal Reserve must do everything in its power to ensure that the CRA’s provisions are enforced and that vulnerable American’s are not excluded from the financial system.

Our nation’s banks enjoy remarkable privileges.  Their deposits are explicitly guaranteed with taxpayer money, they are given access to the Federal Reserve’s discount lending window, and banks with a federal charter are effectively exempted from following many state laws.  The government offers them these benefits because of the value they are supposed to provide to our communities. By offering savings accounts, mortgages, and small business loans, they are supposed to help build wealth in communities across the country, allowing our economy to thrive.

Unfortunately, because of racial discrimination and relentless profit-seeking behavior, many Americans, especially Black Americans and other Americans of color, have been excluded from the financial system. These Americans are denied access to wealth creation tools like personal loans, home mortgages, and small business loans and are forced to turn to expensive and often predatory alternative services, such as payday lenders or check cashing services, to meet their basic financial needs.

Congress passed the CRA to correct this historic inequality and encourage banks to serve our vulnerable communities, and it entrusted the financial regulators, including the Federal Reserve, to create rules implementing the Act. In light of the massive technological changes that have occurred in the banking sector, and the persistent disadvantages that underserved communities still suffer, those rules are due for an update. As explained in our comment letter, while we are glad to see that the Federal Reserve appears genuinely interested in improving its CRA rules, we are concerned that the Federal Reserve will give undue consideration to the ”burdens” any effective new rule may place on banks. Any such burdens—to the extent they are real and not sky-is-falling rhetoric—have already been deemed necessary and appropriate by Congress to achieve the underlying objectives of the CRA. In our comment letter have also reminded the agency that in order to reduce racial disparities in access to banking, the Federal Reserve must take specific and targeted action to undo the damage inflicted by centuries of explicit racial  discrimination.

Rad our full comment letter here, or by clicking the button below.

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