While Democratic senators entreated the national regulator of banks to drop – or at least postpone – a proposal to reform rules implementing anti-redlining laws during the coronavirus crisis, the regulator responded that, to the contrary, his agency is looking at accelerating the timetable for making the proposal final.
In an oversight hearing Tuesday before the Senate Banking Committee featuring the three federal banking agencies and the federal credit union regulator, Comptroller of the Currency Joseph Otting said his agency was looking at hastening adoption of a final rule to reform Community Reinvestment Act (CRA) regulations during the pandemic’s impact on the financial system. He said the Office of the Comptroller of the Currency (OCC) was doing so to help “drive more dollars into LMI (low-to-moderate income) communities across America.”
Otting was responding to a question from Sen. Robert Menendez (D-N.J.), who asked if OCC should revisit its proposal on CRA reform.
Earlier in the hearing, Sen. Tim Scott (R-S.C.) pointed out the impact of the pandemic crisis was being felt the hardest among low- and moderate-income communities, as well as minority communities. Otting maintained that the CRA reform proposal would help to improve access to credit for minority-owned depository institutions (MDIs), by providing CRA credits for banks making investments in the institutions. He also said the proposal clarifies that bank investments in community development financial institutions (CDFIs) are eligible for CRA credits.
But Menendez disputed Otting’s views about the proposal. He told the comptroller that the proposed changes in the rules do not encourage lending to small business, and will not help those businesses to get access to credit during the pandemic or afterward. “Because (the proposal) is just not going to help, and that’s what we hear across the spectrum,” the New Jersey senator said.
Other Democrats chimed in with similar concerns to Menendez’ about the proposal (including Mark Warner [Va.], Brian Schatz [Hawaii], and Chris Van Hollen [Md.]), calling either for the OCC (and the Federal Deposit Insurance Corp. [FDIC], which joined the OCC in proposing the reforms) to postpone or drop it. Warner, in addition, called for public hearings about the proposal with Otting as the only witness.
The committee’s ranking Democrat, Sherrod Brown (Ohio), was the most strident. In his opening comments, he leveled charges that the OCC was “marching ahead with its plan to dismantle a civil rights-era law that requires banks to actually serve the communities where they do business, including low- and moderate-income communities.”
Brown charged that black and brown and low-income communities were hit hardest by the deep recession of more than a decade ago, and the same thing was happening again. He called the pandemic the “great revealer” of the “kind of discrimination that has afflicted black and brown people in this country.”
“And instead of pitching in to help, the OCC and FDIC want to gut one of the few tools we have to make sure banks pay any attention to underserved communities and rural areas.”
In closing comments, Brown said he was “just incredulous that our regulators continue to want to move forward” with the CRA reform proposal.
Committee Chairman Mike Crapo (R-Idaho), in his closing remarks, defended the regulators, saying that they were, indeed, paying attention to the problem of unequal access to credit during pandemic. “There’s disagreement on the solution, but not on the problem,” Crapo said.