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CRA is under continual attack on the legislative, regulatory and corporate playing fields. The 1999 Gramm-Leach-Bliley legislation undercut the CRA by allowing financial corporations to merge operations without community reinvestment responsibilities or without requiring financial institutions and nonprofit organizations to report on CRA deals. Every year, bills are introduced in Congress that, if passed, would further undercut CRA, and fair housing and fair lending laws.
Regulators are conducting a review of CRA through 2002. Community organizations must project their issues into this review to prevent backward movement of the regulation. Currently, most banks are receiving satisfactory or outstanding ratings from regulators (a process called grade inflation). Community organizations need to respond by contacting regulators about banks with which they have concerns. Community organizations also need to keep an eye on regulatory changes (posted in the Federal Register) that may undercut CRA as banking changes.
The consolidation of the corporate structures including insurers, finance companies, mutual funds, stock brokerages, banks, mortgage companies and others creates difficulty for upholding CRA. These large, new corporations are less focused on depositors and neighborhoods than banks were previously. In addition, the new structures may move former banking practices to subsidiaries that do the mortgage or consumer lending but are not regulated under CRA.
Review CRA Evaluation : All large banks and savings and loans' CRA activities are examined at least every two years by federal banking regulators. The regulators assess compliance to the CRA in three major activities: lending, services, and investments. Lending is the most important of the three. Community development is a special subcategory of all three banking areas, and prescribes additional credit availability for certain activities. Regulators report on CRA performance of each regulated financial institution that they examine. The public portion of the report can be obtained from the financial institution or the regulator.
Monitor Merger Applications : All financial institutions must file an application for approval of an acquisition or merger. Portions of the application are public and can contain useful information. These are announced on the regulators' web sites and, often, in newspapers.
Evaluate CRA Public Files : All regulated financial institutions must keep all complaints for two years in at least one office in every metropolitan area as well as in the bank's main office. They must also keep a record of their CRA goals and activities in the file.
Review Fair Housing and Fair Lending Practices : It is illegal to discriminate against an applicant based on race, age, gender, or disability. Fair housing councils monitor violations, and can provide information about a bank's fair lending practices.
Monitor Annual Corporate Reports : Most public corporations publish an annual report and are required by law to file a more detailed financial report with the Securities and Exchange Commission (SEC). The annual financial report is SEC Form 10K, the quarterly report is Form 10Q. Both financial reports are publicly available.
Examine Proxy Statements : At times of major corporate events, such as mergers, the corporation issues a proxy statement to its shareholders and the SEC that often has very useful information in it about legal suits against the bank, financial difficulties, or new lines of business.
Scrutinize Home Mortgage (HMDA) Data : All mortgage lenders must report home purchase, refinance, and rehabilitation loans on properties with one to four housing units and permanent loans for larger units. These reports include loan applications, denials, and approvals categorized by race, gender, income, and census tract. They also contain data on multifamily mortgage lending (five or more units). This is public information and can be obtained from a bank main office or any branch in a metropolitan area.
Evaluate Business Lending Data : Information on lending to businesses in low, median, and moderate-income census tracts is also public and can be obtained from a bank main office or any branch in a metropolitan area.
Compile Community Knowledge : Members of community organizations, neighbors and others are likely to know a great deal about historical lending discrimination and the needs of the community.
Track Deposits and Market Share : The Federal Deposit Insurance Corporation (FDIC) has annually updated records of deposits in each branch of each bank. In addition, the FDIC tracks market share of banks.
Monitor Newspaper Articles and Public Testimony : Most likely, local newspapers have covered banking, and a search of archives may prove useful. It is also possible that bank representatives have testified before city, state, or federal legislative bodies regarding community needs. Some listservs cover reinvestment information as well.
Petition Public Officials
There are four federal financial regulatory agencies - the Federal Reserve Bank, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS). They each have jurisdiction over different financial institutions although some very large banks may be regulated by more than one agency. The regulators examine larger banks every two years for 1) safety and soundness and 2) CRA compliance, including fair lending issues. Smaller banks, those with less than $250 million in assets, are now examined every four to five years.) Banks with negative ratings ("needs to improve" or "substantial noncompliance") are examined more often. Nearly 99 percent of all financial institutions get rated "satisfactory" or "outstanding" for their CRA activities. Some decry this as "grade inflation."
These increasingly important examinations are publicly announced on the regulators' web sites. They create an opportunity to organize community members, forge alliances, mount a letter writing campaign, identify bank lending, investment and service problems, and call for investigation. Writers should specifically ask that their letter be placed in the bank's public CRA file to document a history of problems with the bank when regulators must review the public CRA file.
When a merger or other activity requires approval, the regulators can hold public hearings. If hearings are not scheduled, communities can press for them. Regulators can also extend the comment period on proposed mergers to give community representatives more time to respond effectively.
Bank regulators should be visiting community organizations and businesses to study banking practices. If not, community advocates may choose to contact them, requesting a meeting or series of meetings.
City council members, state legislators, members of Congress and other officials should also be participating to ensure that local community needs are met. If not, applying community pressure may be worthwhile.
As banks expand beyond any one community or state, community advocates must find ways to measure appropriate levels of commitment. When a bank is located in only one state, use bank assets and net income as the base measurement. California Reinvestment Committee advocates for at least 4.5 % of assets with 2% of net income before taxes as the amount of community investment and grants. For a financial institution that operates in more than one state, it is difficult to assess the amount of assets or net income produced by operations in any one state or community. In these cases, CRC uses deposits as the base measurement because the amount of deposits is easily calculated for any geographic area. This information is readily available from and verifiable by the FDIC.
Measuring CRA compliance continues to be a complicated task as some financial institutions not only lend using their deposits but also borrow money to make loans. Borrowing funds allows them to loan against an amount larger than their total deposits. Therefore, no set percentages exist to form a measurement that will work for all banks. Nor is there an absolutely perfect proportion of housing lending, business lending, consumer lending, or community investment that can be applied to all financial institutions. The best measurement is current bank and savings and loan practices, and focused plans to meet community needs in the future.
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