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Advocates Push for CRA Expansion at House Hearing

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Proponents of expanding and updating the Community Reinvestment Act (CRA) argued for the inclusion of non-bank depositories and more flexibility in how lenders receive credit for complying with the act’s regulations, while at least one opponent argued for repealing the act during a House Financial Services Committee hearing Wednesday. The CRA is designed to encourage banks to lend to all communities in the region where they are located and prohibits discriminatory lending practices. When the act was established in 1977, most banks were regional or state institutions. Now they’re national and international institutions and the CRA needs to be amended to take that shift into account, said John Taylor, president and CEO of the National Community Reinvestment Coalition (NCRC), an association of more than 600 community organizations that promotes equal banking services for low- and moderate-income individuals. Massachusetts bank commissioner Steven Antonakes testified that credit unions should be included in the federal act, as they are in his state’s version of a state CRA, but warned “extending CRA to credit unions is not as simple as just cutting and pasting the bank regulations and applying them to credit unions.” Antonakes said key differences in credit unions’ business operations, specifically industry unions that represent workers, rather than residents of a regional area, should be taken into account. Some proponents of expanding the act argued banks should be required to include affiliate companies when they are evaluated for CRA compliance. In a letter to the committee, National Association of Federal Credit Unions (NAFCU) president B. Dan Berger opposed that proposal and said that if all financial institutions acted like credit unions — taking deposits and lending to only their members — there wouldn’t be a need for banks to be regulated with the act. Lawrence White, a New York University professor of economics, opposes the act and called for its repeal. He said the CRA’s goal of promoting bank lending in the communities where they are located is outdated and based on a perception of banks, “where competition was not especially vigorous and state and national regulations often impeded entry and prevented banks from branching outside their home communities, which thereby often created pockets of local market power.” White said enforcement of equal and fair lending practices is already covered in the Equal Credit Opportunity Act, the Fair Housing Act, federal antitrust regulations and various state legislations. When there is a case to be made for local lending initiatives, it should be accomplished through federally funded programs, similar to the Community Development Financial Institutions Fund, White said. Another point of contention among the group of witnesses is what role the proposed Consumer Finance Protection Agency (CFPA) would have in enforcing the CRA. While Taylor from the NCRC advocated that if the CFPA is created, it should take over jurisdiction of enforcing the CRA, Leslie Anderson, president and CEO of Nebraska's Bank of Bennington and an officer of the American Bankers Association, opposed such a move. “The CRA is not a consumer protection law and any re-assignment of CRA responsibility to a specialized consumer protection agency untutored in, and un-constrained by, a safety and soundness mission would unnerve the regulatory process,” Anderson said. Some proponents of the amending the act said there should be increased incentives for banks that comply with the regulations. Orson Aguilar, executive director of the Greenlining Institute, a non-profit group originally founded to stop the discriminatory lending practices of redlining, argued banks should be given more leeway in how they promote wealth building in their communities. By establishing more broad definitions, banks could promote job growth and philanthropy efforts for CRA credit. Write to Austin Kilgore.

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