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For decades, Americans living in certain neighborhoods couldn’t borrow money to buy houses and build businesses. These neighborhoods were home to people of color, immigrants and poor white people. Banks, real-estate agents, local officials and the federal government labeled their neighborhoods “hazardous,” marking them off with red lines on maps.

The Community Reinvestment Act was passed in 1977 to end this practice of “redlining,” by requiring banks to lend money in the communities where they are chartered to do business or receive deposits. Banks have made nearly $2 trillion in small-business and community development loans since 1996, according to our calculations, to meet the requirements of the law. That’s an impressive record.

But the law didn’t erase discrimination. Nor has it ended America’s glaring economic segregation, which is caused in part by unequal access to banking and credit. Three out of four neighborhoods marked “hazardous” by government surveyors 80 years ago are still lower-income today, according to our analysis.


Nevertheless, the Trump administration is proposing changes promoted as ways to simplify the law that will, in fact, be a huge step backward.

On Tuesday, the Office of the Comptroller of the Currency announced it will review and revise the rules it sets for banks to comply with the Community Reinvestment Act. One of the proposed changes is the introduction of a mathematical formula, a ratio, that banks and regulators could use to measure a bank’s performance under the law.

This ratio would be the value of all of a bank’s community lending activities — loans, services and philanthropy — divided by some measure of the bank’s capacity, such as total assets or total deposits. It is supposed to bring more clarity to how the government assesses compliance with the law.

It sounds reasonable. But coupled with an expansion of the kinds of activities that could count as “community lending,” it could allow banks to make fewer loans in poorer neighborhoods.

The law doesn’t force banks to make risky loans. It simply requires them to make safe loans to borrowers in all ZIP codes in their communities. If banks win their battle to effectively reduce or eliminate the requirement that they invest in specific, historically underserved communities, then they could comply with the law by investing more in some places while doing nothing in others.

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