The Missed Opportunity of Devastating Proportions

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Recently the Office of the Comptroller of the Currency (OCC) released a regulation substantially altering the Community Reinvestment Act (CRA). Fahe was among many urging the OCC to suspend this unnecessary and damaging rulemaking during the COVID-19 emergency. Yet the OCC published the rule after only six weeks of consideration, an extremely short turnaround time to take into account the thousands of comments received.

The missed opportunity in this final rule to turn around investment feels devastating in Appalachia and other low-income communities and communities of black and brown Americans that have suffered historically from intentional disinvestment. It limits public input from members of affected communities and expands the types of activities that would count for CRA credit to include lending and other programs that provide no or little benefit to these communities. It threatens investment that is urgently and greatly needed to make available homes lower income people can afford, at a time when “stay safe at home” means every American can see the value in home.

Fahe expressed our concerns clearly during the comment period that the rule would direct investments to the larger deals in wealthier areas, due to the expansion of activities allowed CRA credit and the new assessment areas allowed. On the expansion of activities, the OCC has now released a list that include things like road projects that LMI communities might benefit from. While Fahe is appreciative that roads and similar major projects are important in Appalachia, those major infrastructure projects are not what Congress designed CRA to address. If we had another law that did a good job of targeting the evils of redlining and invested bank profits in the poorest communities in America, then Fahe would support a discussion about a more general economic development activity rule, as the OCC’s rule seems to be.

The inclusion in the final rule of expansion of CRA assessment areas mainly to places where the banks have concentrations of deposits outside their traditional assessment areas is less excusable. Banks have their concentrations of deposits in the larger, wealthier cities, not in current CRA deserts. In response to our concerns on this, and to commenters with similar concerns, OCC stated that commenters were motivated by our “favored policy outcomes” and “misunderstood the purpose of assessment areas.”

Yes, Fahe is interested in policy that invests in people and businesses who have been historically underserved in Appalachia and in America.

And given our favored policy outcomes, which happen to be the reason the Community Reinvestment Act was passed, we do not misunderstand assessment area’s purpose; we were asking for a specific regulatory change that would actually cause a swath of CRA deserts to be served better.

The OCC says they are incentivizing activity in our underserved areas with multipliers that make this activity more attractive. While it may be true that the proposed final rule allows banks to invest in underserved small town America and receive credit in various ways, our experience on the ground shows that banks will understandably gravitate toward activities they know and those simpler to carry out their CRA responsibilities. Modest multipliers will not change this outcome. We know that the investment in the small rural communities in CRA deserts will not happen unless the agency affirmatively requires it, given the challenges of deal size, lack of connections to larger banks, among other factors.

Further, even were the OCC’s approach correct, the Fahe Network serves both cities and the smallest rural communities, and we know investment in underserved people and business in the cities is essential. Multipliers that reduce the total amount of CRA activity (because the activity in a rural area counts more) and simultaneously deprives our members in the cities of investment is not the right outcome.

In summary, we wish the OCC had not simply disagreed and demeaned our experience on the ground without engaging the reality of a bank’s natural profit motivation in determining its assessment areas. I’m encouraged that the FDIC and Federal Reserve did not join with the OCC in this ruling that is a disregard for people and communities during a national crisis. It appears that communities and advocates will join together to ask a court to review whether the rule was made in a rushed and arbitrary way, or ignored too much of the evidence at hand. It seems also that the Comptroller left his post the day after the rule was released. Given that the OCC itself acknowledged that it did not have the data to judge how banks would implement the new rule, I hope a court will take a close look at the way the agency cherry picked the evidence at hand to support its predetermined outcomes.

Jim King
Jim King
For thirty years, Jim King has worked to advance opportunity for the people and communities of Appalachia. In 1990 he moved to Appalachia to become one of the first staff members at Fahe. Since becoming President in 2000, Mr. King has led Fahe through a period of unprecedented growth in impact, lending, and territory. He pioneered a collaborative model, the Berea Performance Compacts, bringing scale and performance to nonprofits serving rural and remote communities. He established Fahe’s reputation as a national authority on Appalachia, rural issues, and persistent poverty.

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