But first, what is the CRA?
Following massive civil rights organizing by communities of color for social and economic justice, Congress enacted the Community Reinvestment Act in 1977 as a direct response to redlining — the public and private sector practice of denying mortgages and financial services to neighborhoods of color which were typically low-income. CRA requires banks to affirmatively meet the credit needs of the communities they serve, including low and moderate-income people. Although the CRA remains little-known, it requires regulators to rate a bank’s performance in meeting those needs.
However, despite historic disinvestment in and suppression of wealth-building opportunities for people of color, CRA makes no mention of race. This means that while regulators evaluate banks in terms of their lending, services, and investments to low-and-moderate income areas, the law provides no tools to ensure that banks adequately and specifically serve the credit needs of people of color. In its current form, the CRA doesn’t acknowledge that people of color tend to experience more denials, higher interest rates, and smaller loans than their White counterparts, nor does it attempt to disincentivize this.
CLICK TO TWEET: Redlining is discrimination based on race. But the law to fight it ignores race. ??
One way to measure success at attaining economic parity for communities of color is to ask whether a bank’s lending in a state is proportional to the state’s adult demographics. In small business lending, this means that if Latinxs are 17 percent of California’s entrepreneurs, a bank’s lending to Latinx entrepreneurs should hover close to 17% of total small business loans. This parity has never happened. Instead, bank lending to Whites dominates both small business and mortgage lending. Even the flagship 7A loan from the Small Business Administration, a federal loan insurer, is largely inaccessible to entrepreneurs of color: in 2017, one percent went to Native Americans, two percent went to Blacks, and six percent went to Latinx, while 53 percent went to Whites. So, as a stimulator of wealth creation in low wealth communities, the beneficiaries of CRA’s affirmative obligation have been largely White.
Uneven lending happens for varied and complex reasons, but we must ask: What are banks doing to address this gap and address credit needs in communities of color? The Community Reinvestment Act doesn’t ask this question. As long as banks’ lending in low- and moderate-income areas is robust and free of blatant racism, the alarm doesn’t go off. Greenlining exists to sound this alarm.
Moreover, a colorblind CRA is problematic because it does not recognize that redlining and predatory, wealth-stripping financial practices always hurt communities of color first and worst. Slavery, segregation, institutionalized racism, and more recently, lending discrimination led to today’s uneven wealth holdings. In its current form, CRA fails to recognize that racism and redlining have and continue to drive the wealth gap, and thus cannot truly curb it.
The CRA’s omission of race as a real factor in lending, and its implicit assumption that low and moderate wealth individuals are all the same, doesn’t establish the expectation that people of color must be served equitably. Furthermore, it doesn’t indicate that solutions must take note of the lag in our economic recovery after centuries of race-based economic exclusion. In today’s capitalist society, you need wealth to create wealth. So, where does that leave communities of color?
CRA has successfully leveraged billions into low and moderate-income communities, but those investments will be more impactful and equitably distributed when CRA considers race. Otherwise, it’s a blunt tool. A focus on race becomes more urgent as people of color become the new majority in the U.S. Anything less would be a deliberate silencing and denial of people of color’s oppression and of their orchestrated exclusion from the financial mainstream since the country’s inception.
Finally, race must be a focal point not only in modernizing the Community Reinvestment Act, but also in the movement around economic justice. Simply modernizing the law will not change the public discourse around race, even within our own movement. We must unapologetically put race at the center of our advocacy, and we must push for policies that address the experiences of people of color. As we call for unity, we must refrain from patching up our national history to make others comfortable as they are brought into the fold, and emphasize that economic prosperity is not a zero-sum game.
Without embedding race into the CRA and the larger movement for economic justice, we’ll just feed into a long legacy of excluding people of color’s experiences from progressive movements. In our inability to boldly face past and present racism, communities of color still fight for the same issues our advocate predecessors did: land, housing, employment, living wages, and the right to self-determination, among others. It’s time that the U.S. considers these priorities, as well. It’s the only way we can move this movement, and the U.S., forward.
Sharon Velasquez is Greenlining’s Economic Equity Manager. Follow Sharon on Twitter.