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FDIC/OCC Proposal Raises Concern for Low-Income, Rural Communities in the Deep South

December 16th, 2019

Two banking regulators, the Office of Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC), have released a proposal to make sweeping changes to the Community Reinvestment Act (CRA), which is a critical tool for ensuring banks lend, invest and provide services in low-income communities.  The CRA has led to billions of dollars of banking activity in low- and moderate-income communities throughout the Deep South since its enactment in 1977. Notably, the Federal Reserve did not join in this proposal.

Statement by Bill Bynum, CEO, HOPE Enterprise Corporation / HOPE Credit Union/HOPE Policy Institute:

The CRA, while imperfect, has been an important tool for catalyzing investment in low-income Deep South communities often existing beyond the reach of traditional bank business models. Over the last 25 years, through HOPE and its bank partners, CRA facilitated a branch expansion into the Delta, the development of an alternative to high cost small dollar loans and significantly increased access to homeownership to individuals and families experiencing credit challenges in our region. Unfortunately, under the OCC and FDIC proposal, deep concerns arise as to whether those investments would have ever occurred in the first place and the anticipation of less investment in the least economically mobile region of the country.

The Deep South is home to more than 100 counties which have been locked in persistent poverty for more than half a century, due to a wide range of policies focused on the extraction of wealth among low-income people and people of color. The FDIC and OCC proposal essentially moves the CRA – and economic opportunity for our communities – further out of reach in three ways:

  • The changes to the evaluation measure, by emphasizing the dollar value rather than quantity of CRA activities, create a natural incentive for larger, easier activities, potentially reducing the smaller, more intensive investments that Deep South communities so often need.
  • Only requiring high CRA performance in half of communities reviewed for compliance to achieve a high performance rating across the entire bank will potentially lead to overlooking and significantly underinvesting in the most distressed, most rural communities.
  • By focusing on places of deposit concentration, in addition to branch locations, to determine areas for investment, very poor regions – like the Mississippi Delta lacking branches and money to deposit – will continue to be least prioritized.  And, at the same time, it dilutes the investments that might otherwise go to low-income communities in which the branches are actually located.

Ultimately, the proposal widens the wealth gap and further inhibits economic opportunity in already hard-pressed areas of the country, particularly here in the Deep South.

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