Minutes ago, the Office of the Comptroller of the Currency demonstrated once again why no one takes their CRA exams very seriously.

The OCC released evaluations for 27 banks.  All of the evaluations were made from October 15th through November 14th.  No banks were given any grades that would reflect shortcomings in service, lending, or investment to their local areas.  Twenty-five passed, and two passed with “outstanding” colors.

How good is an “outstanding?”  Well, the people who run your credit card are apparently doing an outstanding job at making you happy.  Citibank (South Dakota) NA received an outstanding.  Did they do an outstanding job? Sure, maybe they are charging millions of Americans up to 29.9 percent on their credit card debt, but they did it well, right?

Drilling down to Citibank’s evaluation, it is easy to see some of the reasons for why the CRA needs to be (more…)

Today’s Miller-Moore amendment makes more sense than would first appear.  The new rule, coming out of the House Financial Services Committee, exempts most financial institutions from new regulatory review by the proposed CFPA.

Banks with assets under $10 billion, and credit unions with assets under $1.5 billion, would not be examined by the CFPA.  It seems like a cave-in, right?  What’s up with the lobbyists giving up on so much work from those 8,000 clients? What’s up with helping the country prevent another meltdown?

Advocates initially responded with some frustration.  The National Community Reinvestment Coalition published a (more…)

The Federal Financial Institutions Examination Council (FFIEC) released the new Home Mortgage Disclosure Act records for 2008 this week.  The data, referred to as “HMDA data,” covers 14.2 million mortgage loan applications and another 2.9 million mortgage loan purchases on the secondary market.  Want to see what I am talking about? You can download the data here.

The HMDA data is released to help citizens understand how banks and other lenders are working in their neighborhoods.  It was legislated through the Home Mortgage Disclosure Act, and it dovetails within the broader aims of the Community Reinvestment Act.

New legislation is on the table in DC that would counter the shortcomings of this data.  HMDA is broken.  (more…)

Its a maxim that regulators can never quite catch up with the changes made by practitioners.  Mobile banking threatens to become the next example of that concept.  It very well could lead to undermine the Community Reinvestment Act (if unwittingly) unless some kind of regulatory fix occurs first.

The new Community Reinvestment Act Modernization bill (HR 1479) seeks to help that legislation catch up with the set of financial innovations that have occurred since the bill was last modified in 1993.  A lot has happened.  There is a lot of catching up to do.

That bill was drafted this spring.  Even now, though, it appears that the market is changing so fast that there could be a need for new amendments to the bill’s language before it is heard by the House Financial Services committee in the fall.

Today, there is news out of Charlotte than Bank of America is going to close one out of every ten of (more…)

The Community Reinvestment Act will be fully examined on Tuesday at a special forum, hosted by the Boston and San Francisco branches of the Federal Reserve, at the Mandarin Oriental Hotel in Washington, DC on Tuesday.

The event will coincide with the publication of “Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act.”

There are a lot of interesting ideas in the 21 papers contained within the publication.  Ideas have been contributed from across the spectrum of politics and market positions.  The American Bankers Association has a comment, as does the former CRA officer from JP Morgan Chase.  A representative of AON, the largest insurance broker in the country, weighs in against proposals to expand CRA to her industry.  Former heads of the OTS and the OCC have things to say on behalf of the CRA.  A “conservative with a concious,” as he identifies himself, finds three relevant areas for the CRA to be re-entrenched – in home lending, in payment services, and in consumer education.

Some of the issues that appeared in many papers include:

• More types of financial institutions, beginning with independent mortgage brokers, should come under the review of the CRA.
• Data in the Home Mortgage Disclosure Act database and the CRA small business and community development lending database need to be updated.  Those updates should become the basis for a redefinition of the goals of the CRA exam.
• Banking as an industry has changed.  More financial institutions have become national or even global.  The notion of a local commitment must accordingly be updated.
• The scale of some banks, as a result of mergers, makes them relatively insensitive to the CRA exam.  This, coupled with grade inflation on the exam scores, means that very few CRA exams bring to bear any kind of direct response from a financial institution.  A redesign of the CRA look at how it can adjust for these very large institutions.

Some urgent questions remain unsettled:

What is the purpose of CRA? Does it have an implicit, but not stated, understanding that extends to race? Does the CRA require banks to make unprofitable loans or to establish unprofitable branches.  How well do CRA loans perform?  Are loans in low-income communities best percieved as a public good, for which their under-supply is only mitigated by government intervention?

Is there a quid pro quo because of deposit insurance, the discount window, and TARP?

What is the proper role for community groups?