Touching a Liberal Third Rail. The Trump administration rightly proposes to fix the Community Reinvestment Act and its damaging legacy.

City Journal ^ | January 17, 2020 | Howard Husock

[karpov]

The Trump administration is under fire for daring to touch a third rail of liberal financial regulation: the 1978 Community Reinvestment Act, or CRA. The proposed new regulations would affect 70 percent of banks by replacing requirements that bank lending target specific geographies or borrowers, such as low-income minorities. Instead, banks would set total dollar goals for lending to low-income borrowers, with the aim of helping poor communities broadly, rather than focusing on specific neighborhoods.

Some of these loans might have occurred anyway, and critics (which include the Federal Reserve) oppose the idea that banks could get “CRA credit” for them. But the new policy should be welcomed as an improvement for lower-income business and mortgage borrowers. Operating in a far more competitive financial-services industry than the late 1970s, lenders will better serve poor neighborhoods by treating them no differently than more affluent areas.

The CRA has become a liberal icon—and a conservative bête noire, cast as a partial accessory to the 2008 financial crisis, on the view that pressuring banks to make loans based on borrowers’ location, rather than on their creditworthiness, leads to poor underwriting practices. Regardless of how one sees the CRA’s history, the Trump administration is right to revise the law; it would be right to repeal it, too, though repeal is unlikely.

The CRA doubtless pushes banks to allocate capital in unconventional ways. For groups like the National Community Reinvestment Coalition, a defender of the law, that’s exactly the point. In their eyes, low-income minority areas are “underserved” by lenders. The New York Times echoes that view. “Banks don’t like lending in lower-income neighborhoods,” its editorial board declared, “even as they profit from deposits taken from those same communities.” Many neighborhoods, the paper continued, are “credit deserts.”

[immadashell]

lol

[Jane Long]

Looks like NanFreako and MadMarxine can barely contain themselves, in that pic. ...over all of the $$$$ they’ll get.