Mark Winston Griffith
Banking on the Bottom, Revisited
The best way to honor the Community Reinvestment Act is to re-invent it.
That was basically my point when I wrote the op-ed that appeared in the New York Times this past weekend. But here's what I didn't have enough room to say:
CRA is primarily a weak, reactionary instrument that, technically, can only be enforced when a bank formally applies for permission from a regulatory body to conduct a change in business. Last year ninety-nine percent of banks received satisfactory ratings or better, making CRA ratings almost meaningless. From 1985 to 1999, only one tenth of one percent of the bank applications subject to CRA review was denied by regulators, for reasons that may not have had anything to do with CRA.
These days banks use the CRA as little more than political cover for their mergers. A random survey of Federal Reserve merger hearings conducted by the Neighborhood Economic Development Advocacy Project found that every group that testified in favor of the Bank of America/Fleet merger, as well as the Chase/Bank One merger, had received support from the acquiring or acquired bank, sometimes from both.
But CRA is more than just a porous safeguard. It represents an out-dated paradigm. Banks, due mostly to deregulation, increasingly invest in other forms of non-CRA regulated activity.
We cannot afford to abandon the CRA's legacy at a time when our government values the free market more than it does consumer rights. Nor can poor people afford to have their day-to-day financial reality obscured by a fixation on crippled, exclusively bank-based, policy reform. It is time for advocates to re-imagine a new community reinvestment paradigm.
Posted by Mark Winston Griffith at October 10, 2005 09:33 PM
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