During the current financial markets meltdown, I've heard and read (even here) a few people try to pin our problems on the federal Community Reinvestment Act requirements that lending institutions invest in the health, renewal and redevelopment of the communities in which they do business and garner profits.
This claim is absurd.
On Tuesday, I was involved in a national conference call with a very large national bank's community development advisory board. During our conversation, I asked the bankers in charge if blaming the CRA obligations made any sense at all.
Of course, the banks would just as soon these requirements go away since that would mean more profits for their companies. And, you'll recall that Senator Phil Gramm (R-TX) tried to repeal all CRA requirements a few years back. You'll also recall that he's the economic advisor who recently characterized the concern ordinary Americans expressed about the state of our economy as "a nation of whiners" caught up in a "mental recession."
But, back to my phone conference.
The banker I asked summed things up this way, "As far as CRA requirements and the current crisis in the financial markets, anyone who claims that our problems are the result of the CRA rules just doesn't understand the crisis or the way those requirements are worked out in a community. Further, these rules have been around for decades (enacted in 1977) and they just aren't the problem."
Now this comes from a banker, mind you!
By the way, even Business Week gets this!
I followed up by asking where I might find hard data on the percentage of earnings required for reinvestment in a communities under the rules. I also asked where I might find the actual amounts spent to fulfill the regulations and to what sorts of projects they were directed.
I know from experience here in Dallas, that for most banks the numbers are not huge, nor are the outcomes overwhelmingly impressive in terms of community impact.
Blaming already grossly underfunded programs designed to extend a helping, equitable, non-biased, lifting hand to the poor simply doesn't line up with reality on the ground out here in the neighborhoods.
So, lay off the CRA rhetoric, would you?