It is with sadness that I watch from Amsterdam the social unrest in the US. Coming on top of the economic crisis resulting from COVID-19, the challenges facing society and its banking system is only greater. Therefore I read with interest the proposed regulatory change from the Office of the Comptroller of the Currency regarding the Community Reinvestment Act. That act was intended to address the conscious discrimination by banks relative to lending to communities where housing ownership was shifting to people of color. Banks and government agencies that provided guarantees for mortgages would literally draw a red line around certain communities noting that no mortgages would be allowed within those red lines. Needless to say that led to decreases in property values and ensured that home ownership, a classic source of wealth accumulation in the US, was not available to many.
Whilst it may be time for revising and improving the rules implementing the Community Reinvestment Act, as noted in the New York Times, the Comptroller of the Currency seems to be forging his own path. That path seems to be based in part on challenges he faced as a banker. More importantly he has been unable to secure support from the other US regulators and even the mainstream American Bankers Association. It seems to me that pushing forward on this initiative at a time when the negative results of racial and economic inequality are being evidenced every day in the US is wrong. These changes are not going to provide support for banks but only perpetuate a system that creates an unhealthy and unsustainable economy – never good for banking.
