Today, outgoing Comptroller of the Currency Joseph Otting pushed through dangerous revisions to the Community Reinvestment Act (CRA) that threaten to undermine the bedrock of community investment activity in the United States.
Tellingly, he was not joined in this effort by any of the OCC’s fellow regulators at the FDIC or the Federal Reserve. In its own words, the FDIC “recognizes the herculean effort community banks are making to support America's small businesses and families during this challenging time and encourages financial institutions to work constructively with borrowers affected by COVID-19.” We agree that an economic crisis is not the time to undermine community finance institutions or to saddle banks and investors with complicated new investment regulations.
The U.S. Impact Investing Alliance and the impact investing industry strongly opposed the misguided reform efforts of Comptroller Otting. We and others in the field urged regulators to pause the rulemaking amid the public health crisis and period of economic turmoil. [See the recent letter submitted on behalf of the Presidents’ Council on Impact Investing about how “in effort to modernize CRA, regulators are poised to strip community development tool at a time when stability is paramount”] By acting unilaterally, Comptroller Otting has cast uncertainty over the fate of billions of dollars of desperately needed investments in communities hardest hit by the COVID-19 crisis. That uncertainty could deprive thousands of small businesses, health centers, education facilities and nonprofits of the crucial lifelines keeping them afloat.
We agree about the need for a modernized CRA, but this short-sighted action moves in the wrong direction. We will continue to work with policymakers at the Federal Reserve and the FDIC to offer input on a set of regulations that promote authentic engagement with residents in low and moderate income communities and which will effectively draw essential private capital to those places. We hope that under new leadership, the OCC will also revisit this damaging and destabilizing reform of CRA.