: Can an effort to revamp anti-redlining lending laws survive the swamp?

by | Jul 20, 2022 | Stock Market

Color-coded maps in the 1930s designated predominantly Black and immigrant neighborhoods as too risky to receive New Deal-era government-backed home loans, a practice known as redlining.  Without any fresh investment, buildings in these neighborhoods often fell into disrepair, and housing discrimination played a major role in fueling the racial wealth gap. The typical white family today holds eight times the wealth of a typical Black family and five times the wealth of a typical Hispanic family, according to Federal Reserve data.

In the post-Watergate reform era, Congress tried to reverse redlining through the 1977 Community Reinvestment Act (CRA), which aimed to incentivize banks to invest in and serve the credit needs of poor neighborhoods. Initially, the government turned to a relatively simple method: tracking the number of branches banks operated in low- and moderate-income neighborhoods. Yet studies show that redlining continues today. A proposed modernization of the CRA released May 5 would give banks credit for online lending in low- and moderate-income neighborhoods — one basic area that continues to draw support from both sides of the aisle and from the banking industry. The update would also require more disclosure of racial and ethnic data on who gets mortgages, more closely tie any fair-lending infractions by banks to reviews of their CRA compliance, and recognize the role of smaller lenders in helping neighborhoods advance. See: Effort to bring civil rights era banking law into digital age begins Some critics, however, say the reform falls short on closing the racial lending gap because it lac …

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