Rep. Maloney Commends OCC’s Reconsideration of Harmful CRA Regulation at Today’s Financial Services Committee Hearing
WASHINGTON, DC — At today’s Financial Services virtual hearing titled “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions,” Congresswoman Carolyn B. Maloney (D-NY), senior member of the committee, commended Mr. Michael Hsu, Acting Comptroller of the Currency, on the Office of the Comptroller of the Currency’s (OCC) announcement yesterday that the agency would reconsider a rule that would significantly weaken the Community Reinvestment Act (CRA) and leave our most vulnerable communities behind.
As part of landmark civil rights legislation passed in the 1960s and 1970s, the CRA was created in response to redlining, a practice by which banks discriminated against prospective customers based primarily on where they lived, or their racial or ethnic background, rather than creditworthiness. The OCC rule which is now under review would weaken the agency’s implementation of the law, which could lead to disinvestment in many low- and moderate-income communities.
In response to yesterday’s OCC announcement, Rep. Maloney asked Mr. Hsu, “Do you believe that our communities would be best served by having one uniform standard across the banking regulators, rather than different standards for each regulator and their related financial institutions?”
Mr. Hsu replied, “As a general matter, yes. I think that is definitely the case. I think there are a lot of devilish details here, and I’m waiting to review to get that confirmed. […] I think when the agencies act together, the effects are stronger and more sustained. And I think that’s been proven many times.”
Rep. Maloney continued, “And I’d like to ask you, what deficiencies in the final rule led the OCC to make its decision to reconsider the 2020 rulemaking?”
Mr. Hsu answered, “I think it really comes back to those three factors I cited before, which is the impact of the pandemic, I think will become much more clear, it’s just the need is sharpened and we have more data to support that. The comments on the Fed’s [Advanced Notice of Proposed Rulemaking], I think there are a lot of comments there that we have been following very closely, so it’s new information there. And again, part of our experience with the partial implementation of the rule, which has had its ups and downs, I don’t know all the details around that, but the combination of those factors really prompted me and staff to say, okay, we need to reconsider this.”
You can watch the full exchange here.
The Community Reinvestment Act (CRA), enacted into law by Congress in 1977, addresses how banks meet the credit and capital needs of the communities they serve. As part of landmark civil rights legislation passed in the 1960s and 1970s, CRA was created in response to redlining, a practice by which banks discriminated against prospective customers based primarily on where they lived, or their racial or ethnic background, rather than creditworthiness. In passing the CRA, Congress affirmed that “regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business,” and for “each appropriate federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.”
Last year, Representative Maloney, along with all Democrats on the House Financial Services Committee, sent a letter to OCC Comptroller Otting and Jelena McWilliams, Chairman of the Federal Deposit Insurance Corporation (FDIC), urging them to prioritize a strong response to the COVID-19 pandemic and suspend efforts to revise the Community Reinvestment Act and any unrelated rulemakings. The letter stated that the members were “deeply concerned that the [proposed rule] dilutes the focus of CRA on meaningful investments in LMI communities and small businesses.” The House of Representatives also passed legislation in June 2020 that would have nullified the OCC’s final rule.