Congress wanted to ensure that commercial banks lent a healthy amount to people of all income-levels; this was to ensure that when things like Quantitative Easing or Zero percent interest rates rolled around, not only the already-wealthy got to benefit- as is currently happening anyway with the ever-growing income gap. To “incentivize” the banks, they decided to award commercial banks tax-payer funding while maintaining their independent ability to screw the public over… “demanding” (rather meekly and in a pitifully subservient tone) that the poor get some money too of course:
“A public charter conveys numerous economic benefits,” said William Proxmire, then head of the Senate Banking Committee, “and in return it is legitimate for public policy and regulatory practice to require some public purpose.”
According to the “Community Reinvestment Act” (CRA), banks receive an examination every once in a while to determine whether they have been lending and investing in low-and-moderate-income neighborhoods (LMI) where the banks receive deposits. Since the enactment of this act, 97% of all banks examined have received “satisfactory” or “outstanding” grade…
However, surprise surprise, it seems that this might not be an entirely accurate presentation of facts; over one in four Americans have no or little access to financing. 93% of all bank branch closures occurred in low-income neighborhoods, preventing the poor from obtaining financing, forcing them into the eagerly-awaiting arms of predatory lenders who will ensure that they never recover from poverty… predators funded by the banks themselves.
Now, I’m sure you’re wondering just how the bankers have managed to pull off this ruse. Well, apparently, regulators who work hand-in-hand with the wolves that they are supposed to police don’t ONLY give banks freebies with easily-exploited loopholes. They also don’t really have much incentive to keep up with the myriad of new “financial innovations” (scam) that banks come up with to circumvent the loopholes.
“Regulators have not been scrutinizing the purported CRA-eligible activities to the extent we need,” said Kevin Stein of the California Reinvestment Coalition- or, more accurately, regulators have been turning a blind eye to their activities.
The number of different regulators has ironically been harmful rather than helpful to the situation. The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency all separately conduct examinations on different banks; all of them also have differing standards and methods of assessing these CRA-eligible activities. Further they assume that just because deposits come from a poor neighborhood, these deposits will be reinvested in that community… this has led them to view banks deposits made over the internet without this CRA requirement. This is a poor assumption, a purposefully poor assumption, given the fact that deposits made in one particular location can loan that money to another part of the country instantaneously via the magic of the internet. The lack of physical branches in poorer communities would also force them in greater number into internet slav- I mean banking.
Some of these “CRA-eligible” activities are downright harmful to low-income residents… and besides all this, the CRA is a toothless act because it imposes NO penalties even IF a bank falls into a negative rating.
And while banks have been given credit for questionable CRA-eligible activities… harmful activities like the above-mentioned funding of predatory lenders often get overlooked. When a bank funds “institutional investors” to buy up 130,000 distressed single-family homes, so that it can convert these into rental properties, these activities miraculously help its CRA score; the California Reinvestment coalition seems to suspect that banks are getting credit for activities that negatively affect poorer communities JUST BECAUSE they happen within the communities- a fact that has not been denied by the regulators.
Regulators have apparently decided to review the act under the 1996 Paperwork Reduction Act, which Banks have often used to their advantage in order to cancel regulatory requirements that actually prevented them from doing harm to us all. Advocates however want regulators to update the law:
“We want to focus on how the CRA can be implemented in a way that achieves its promise,” said Kevin Stein. “We think CRA is incredibly important, it has made a difference. We need it to make more of a difference.”
Yeah… good luck working within a corrupted system with corrupted regulators in order to strengthen a law that would in one way or another inhibit the corrupt actions of a corrupted financial system run exclusively to the benefit of the corrupt people who control the corrupt politicians.
Sources; The Intercept
This Article (Regulators: Banks Helping The Poor By Financing Their Forcible Removal From Their Own Homes) is free and open source. You have permission to republish this article under a Creative Commons license with attribution to the author(CoNN) and AnonHQ.com.
