Leaders from the philanthropic and impact investing community joined together today to publish a letter calling on regulators to indefinitely delay the rulemaking process for the Community Reinvestment Act (CRA), especially given the coronavirus pandemic’s disproportionate impact on the low- and moderate-income neighborhoods that the CRA is designed to serve.
The Presidents’ Council on Impact Investing, a philanthropic leadership group facilitated by the U.S. Impact Investing Alliance with more than $80 billion in combined assets, argues that the “Proposal to Modernize Community Reinvestment Act Rules” released earlier this year by the OCC and FDIC would result in less lending and investments in low-income communities and reduce accountability to these communities, effectively gutting the CRA of its core purpose.
The CRA was introduced in 1977 to counteract the effects of systemic racism in the financial services system. It specifically responded to the legacy of redlining, which was a deliberate endeavor to deprive communities of color from access to home loans or lines of credit. By requiring banks to invest equitably in every community they serve, the CRA has successfully mobilized more than $6 trillion of investments since its passage in the form of community development loans, investments and other services targeted at low-income communities and communities of color.
Despite this important progress, many Americans still lack access to affordable housing. As of 2018, the U.S. faces of a shortage of at least 7.2 million affordable housing units, according to the National Low Income Housing Coalition. This number is likely only to increase in the weeks and months ahead due to the economic turmoil caused by the global COVID-19 outbreak.
In the letter, the Presidents’ Council writes:
The COVID-19 pandemic and the threat of a prolonged recession or even depression will inflict long-lasting damage on our most vulnerable communities, even in a best-case scenario where we can restrain the virus’ spread. Leaders and institutions are rightfully looking to marshal every available resource to aid our collective response. We must move decisively to keep people in their homes, protect the well-being of those most vulnerable, and prepare businesses to reopen when possible. It is in this context that we are calling for the immediate suspension of efforts that could severely undermine the Community Reinvestment Act (CRA) and rob communities of desperately needed support.
Darren Walker, President of the Ford Foundation and Co-Chair of the Presidents’ Council on Impact Investing: “While governments everywhere attempt to manage the health and economic ramifications of this pandemic, we have a moral responsibility to protect communities most at risk. The Community Reinvestment Act (CRA) is a vital piece of legislation that holds banks accountable to the financial needs of the communities they serve. These proposed regulations threaten the core purpose of the CRA, and regulators must pause the rulemaking process so communities and banks can rely on a strong, existing framework during this time of instability.”
Fran Seegull, Executive Director of the U.S. Impact Investing Alliance: “The Community Reinvestment Act is one of the most important tools we have to craft a successful and equitable recovery from our current crisis. CRA regulators recognized as much when they provided temporary clarifications that allow CRA capital to be deployed for emergency response. That was a laudable step, but now is not the time to cast doubt on the availability of these resources by overhauling the entire system. Regulators should remain focused on the urgent needs of these communities and prioritize what it takes to encourage continued community development and community investment.”
The deadline to submit public comment letters to the OCC/FDIC is April 8. To see the full text of the letter submitted by the Presidents’ Council on Impact Investing, please go to: http://impinvalliance.org/news-updates/presidents-council-letter-cra