[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                    THE COMMUNITY REINVESTMENT ACT:
                     ASSESSING THE LAW'S IMPACT ON
                     DISCRIMINATION AND REDLINING

=======================================================================

                                HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON CONSUMER PROTECTION
                       AND FINANCIAL INSTITUTIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 9, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-16
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
37-447 PDF                  WASHINGTON : 2019                     
          
--------------------------------------------------------------------------------------

                           
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
     Subcommittee on Consumer Protection and Financial Institutions

                  GREGORY W. MEEKS, New York, Chairman

DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
WM. LACY CLAY, Missouri              FRANK D. LUCAS, Oklahoma
DENNY HECK, Washington               BILL POSEY, Florida
BILL FOSTER, Illinois                ANDY BARR, Kentucky
AL LAWSON, Florida                   SCOTT TIPTON, Colorado, Vice 
RASHIDA TLAIB, Michigan                  Ranking Member
KATIE PORTER, California             ROGER WILLIAMS, Texas
AYANNA PRESSLEY, Massachusetts       BARRY LOUDERMILK, Georgia
BEN McADAMS, Utah                    TED BUDD, North Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   DAVID KUSTOFF, Tennessee
JENNIFER WEXTON, Virginia            DENVER RIGGLEMAN, Virginia
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 9, 2019................................................     1
Appendix:
    April 9, 2019................................................    45

                               WITNESSES
                         Tuesday, April 9, 2019

Baradaran, Mehrsa, Professor of Law, University of Georgia School 
  of Law.........................................................     9
Glantz, Aaron, Senior Reporter, Reveal from the Center for 
  Investigative Reporting........................................    14
Mitchell, Benson Doyle, Jr., President and CEO, Industrial Bank, 
  testifying on behalf of the National Bankers Association.......    12
Odom, Clint, Senior Vice President and Executive Director, 
  National Urban League Washington Bureau........................    11
Roberts, Benson F., President and CEO, National Association of 
  Affordable Housing Lenders.....................................    16
Van Tol, Jesse, Chief Executive Officer, National Community 
  Reinvestment Coalition (NCRC)..................................     7

                                APPENDIX

Prepared statements:
    Baradaran, Mehrsa............................................    46
    Glantz, Aaron................................................    63
    Mitchell, Benson Doyle, Jr...................................    71
    Odom, Clint..................................................    91
    Roberts, Benson F............................................   100
    Van Tol, Jesse...............................................   114

              Additional Material Submitted for the Record

Meeks, Hon. Gregory W.:
    Written statement of Greg Baer, CEO, Bank Policy Institute...   143
    Written statement of the Consumer Bankers Association........   147
    Written statement of the Credit Union National Association...   172
Porter, Hon. Katie:
    Written responses to questions for the record from Mehrsa 
      Baradaran..................................................   173

 
                    THE COMMUNITY REINVESTMENT ACT:
                     ASSESSING THE LAW'S IMPACT ON
                      DISCRIMINATION AND REDLINING

                              ----------                              


                         Tuesday, April 9, 2019

             U.S. House of Representatives,
                Subcommittee on Consumer Protection
                        and Financial Institutions,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Gregory W. Meeks 
[chairman of the subcommittee] presiding.
    Members present: Representatives Meeks, Scott, Clay, Heck, 
Foster, Tlaib, Porter, Pressley, McAdams, Ocasio-Cortez, 
Wexton; Luetkemeyer, Lucas, Tipton, Williams, Loudermilk, 
Kustoff, and Riggleman.
    Ex officio present: Representatives Waters and McHenry.
    Chairman Meeks. The Subcommittee on Consumer Protection and 
Financial Institutions will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Also, without objection, members of the full Financial 
Services Committee who are not members of this subcommittee are 
authorized to participate in today's hearing.
    Today's hearing is entitled, ``The Community Reinvestment 
Act: Assessing the Law's Impact on Discrimination and 
Redlining.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Ranking Member Luetkemeyer, members of the subcommittee, 
welcome to this hearing on modernizing the Community 
Reinvestment Act (CRA). The work of our subcommittee is 
critical because we consider the complexities of an evolving 
banking sector enabled by rapid developments in technology and 
critically important issues of consumer protection.
    Today's hearing is an example of these opportunities and 
challenges and the importance of not losing sight of our 
obligations to American families, small businesses, and the 
least fortunate among us.
    The Community Reinvestment Act was enacted into law in 1977 
as a direct response to the long, painful legacy of structural 
discrimination, financial exclusion, and economic suppression 
of racial minorities in America. Banking, finance, housing, and 
access to capital more broadly are key pillars to the 
opportunity in breaking cycles of poverty and exclusion.
    I come from a family of very humble means. My parents' 
access to financing to purchase their home was among the most 
important circumstances that laid a path for me to go to 
college, become an attorney, and ultimately to serve as a 
Member of Congress. My siblings' lives were equally impacted by 
my parents' ability to build equity and allow us to grow up in 
a home.
    Conversely, I have relatives who were deprived of this 
opportunity and whose children's and grandchildren's lives have 
equally been impacted in a negative form. We could not downplay 
the legacy of redlining, structural discrimination in the 
financial sector, and how its impact echoes through time to 
this very day.
    We will hear in the testimony of the witnesses here today 
how the CRA has contributed to redressing some level of 
discrimination in access to banking services and lending, 
including specifically mortgage lending. But we will also hear 
how shocking patterns of discrimination persist, and how racial 
minorities continue to find themselves disproportionately 
denied mortgages and the chance at home ownership.
    Sadly, we will also hear how a brutal combination of 
disproportionate impacts from the financial crisis combined 
with a retrenchment of bank branches have effectively erased 
nearly all of the gains in Black homeownership over the past 50 
years and led to a situation with a gap between Black and white 
homeownership, and that Black wealth is at a level comparative 
to the pre-civil rights era. I repeat: We must do better.
    I look forward to hearing from our witnesses their thoughts 
on effective ways to modernize CRA to address these issues, 
consideration of Fintech, the rapid increase in urban and rural 
banking deserts, and the importance of nonbank lenders who are 
not covered by the CRA.
    Ultimately, I believe that we are interested in ensuring 
that banks and lenders continue to meet their obligations to 
the unbanked and underbanked, and that evolving business models 
and emerging technologies do not lead to increased exclusion or 
new patterns of discrimination.
    The CRA undoubtedly needs to be modernized. And last year, 
the Office of the Comptroller of the Currency (OCC) put forward 
an advance notice of proposed rulemaking (ANPR), which laid out 
some important questions for discussion but also raised some 
red flags for advocates of CRA.
    My office submitted a comment letter, which I am entering 
into the record here, raising some concerns and calling on the 
OCC to protect the integrity of the CRA. The OCC revived some 
1,500 comment letters, and it was rewarding to see that the 
idea of protecting the integrity of the CRA was a common thread 
through most, alongside many good ideas for consideration with 
respect to assessment areas, transparency, accountability, and 
focus on impacting others.
    It has also been very helpful for the Federal Reserve to 
weigh in, including specifically Governor Brainard, whose 
comments on CRA modernization have been thoughtful and offer a 
constructive framework for tackling complex issues.
    In private meetings, and now here on record, I urge the 
OCC, the FDIC, and the Fed to work in concert on CRA 
modernization in good faith, to take a thoughtful, inclusive 
approach, and to consider carefully the original intent of the 
legislation.
    I was very encouraged to hear that the OCC, the FDIC, and 
the Federal Reserve have been working to harmonize their CRA 
review process and will meet on April 11th, 2 days from now, to 
begin mapping out a notice of proposed rulemaking. I very much 
look forward to discussing these issues further today with the 
panel of witnesses and members of the subcommittee.
    With that, I now recognize Ranking Member Luetkemeyer for 
his opening statement.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. And thank you for 
bringing this important issue and topic in front of the 
subcommittee. I am glad we are having this hearing today to 
discuss how banks meet the credit needs of their local 
communities.
    Throughout my career in the financial services industry, 
and my time in Congress, I have championed access to credit for 
all individuals and businesses. Banks should not decide to make 
loans based on the gender or race of an individual and should 
not deny loans to individuals based on the neighborhood in 
which they live.
    Similarly, banks should not be forced to deny loans and 
eliminate accounts of legal operating businesses simply because 
certain regulators or public officials do not like the industry 
in which they operate.
    It is the role of banks to take into account 
creditworthiness to determine if an individual business is 
eligible for access to financial services. While the vast 
majority of banks work very hard to support and serve their 
communities, the truth remains that too many Americans are 
either unbanked or underbanked.
    Enacted in 1977 to address the banking needs of underserved 
communities, the Community Reinvestment Act was well-intended 
and the original objective was noble. It sought to combat 
redlining, the practice where individuals were discriminated 
against based on where they lived and what their neighborhood 
looked like.
    Unfortunately, the CRA as it exists today is very 
different. Over 40 years later, the CRA has proven to be an 
overly burdensome requirement for financial institutions while 
granting broad authority to regulators with little transparency 
and clarity on how to comply.
    Although the CRA has been amended numerous times since 
1977, many of the rules associated with CRA are not only from 
the pre-cellphone era, but they are from the pre-internet era. 
Since 1977, the banking industry has gone through a major 
evolutionary shift thanks to constantly changing technology. We 
now see Fintech companies popping up everywhere looking to meet 
the challenging credit needs of American consumers.
    Local bank branches are seeing shorter lines as consumers 
turn to online banking. In fact, everyone in this room could go 
online right now and do nearly all of their banking without 
leaving their seat. As banks partner with and acquire these 
Fintech companies, changing the way they serve their customers, 
so must the CRA change the way it applies to banks.
    In reassessing the CRA, banks should be aware of the 
specific requirements they must meet. For example, the CRA 
requires regulators to examine the innovativeness banks use to 
service groups of individuals they previously did not. However, 
no formal definition of ``innovativeness'' has been 
established, leading banks to face a subjective process.
    Across the nation, bankers want clarity on how to comply 
with CRA and better serve low- and moderate-income individuals 
in their communities. In order to solve the many issues of CRA 
over the last year, financial regulators have begun the process 
of utilizing their authority to bring the CRA into the 21st 
Century and align it with the realities of the banking industry 
today.
    I believe this is the correct approach and regulators 
should continue their work to fix this outdated regulation. 
These changes are well overdue, and I look forward to the 
discussion with the panel today to determine what is not 
working with CRA as it exists today and what changes must be 
made going forward.
    I thank the panel of witnesses for appearing this morning 
to discuss this important matter, and I yield back.
    Chairman Meeks. The gentleman yields back.
    And, without objection, the chairwoman of the Full 
Committee, Chairwoman Waters, is recognized for 2 minutes, and 
I will also give the ranking members an additional 2 minutes if 
they want it.
    I now recognize the chairwoman of the Full Committee.
    Chairwoman Waters. Thank you very much, Mr. Chairman. I 
thank you for holding this long overdue hearing on the 
Community Reinvestment Act, a law of immense importance that 
was put in place to ensure fair access to credit and banking 
services.
    CRA is one of the most important and impactful civil rights 
laws applicable to federally insured banks. Enacted into law by 
Congress in 1977, CRA addresses how banks meet the credit and 
capital needs of the communities they serve. CRA was passed in 
response to redlining, a pernicious practice by which banks 
discriminated against prospective customers based primarily on 
their racial or ethnic background and where they live rather 
than credit worthiness.
    However, recent data compiled by one of our witnesses finds 
discrimination in lending continues to be a problem and 
redlining continues to be pervasive in more than 60 metro areas 
across the country. In addition, in 2018, bank regulators gave 
98 percent of banks a passing CRA grade. There is a clear 
disconnect, and these outcomes are simply unacceptable.
    CRA must be strengthened to ensure that neglected 
communities are fully and fairly served by banks that enjoy the 
backing of all U.S. taxpayers. Furthermore, policymakers should 
strive to strengthen CRA's legal framework and explore ways to 
improve how it is implemented and administered.
    Mr. Chairman, I think that the leadership that you and 
others are providing on this issue at this time is extremely 
important. The days are over when banks could get CRA credit 
for a church banquet and a banner on the wall. The days are 
over when it was 50 cents to the Boy Scouts and 25 cents to the 
Girl Scouts. It has to be better. It has to be about doing what 
this law was intended to do. So I thank you for today's 
hearing, and I yield back the balance of my time.
    Chairman Meeks. I yield 2 minutes to the ranking member of 
the Full Committee, Mr. McHenry.
    Mr. McHenry. I thank the chairman.
    Chairman Meeks, thank you for holding this hearing.
    And thank you, Ranking Member Luetkemeyer.
    In 1977, the Community Reinvestment Act was passed. This 
was 6 years before the first mobile phone became available to 
the public. And while the objectives of CRA are not a relic, 
the means to reach it are, in fact, antiquated in our current 
marketplace.
    Today, the CRA is an analog approach in a digital world. 
Ninety-five percent of Americans own a cellphone, so you can no 
longer measure a bank's commitment to its community based on 
the number of physical branches. So we can and we should do 
better. This should be a bipartisan understanding that we have. 
So we should do more to ensure that there is equal access to 
consumer credit.
    There are, in fact, banking deserts in this country in both 
urban and rural areas. So, while the goal of the CRA is 
laudable, the results aren't quite as sterling as we need them 
to be. We need to update this regulation, update the law, in 
fact, if we are able, to ensure that banking is available to 
people on their terms through the medium they choose.
    It is time to reform CRA, not to allow financial 
institutions a free pass but to ensure they are in the best 
possible position to serve their communities, serving their 
communities as those communities deserve to be served by the 
means that they deserve to be served, like all good consumers. 
So I hope we can work on this in a bipartisan fashion.
    I appreciate the panel, the six of you for being here, and 
I look forward to the testimony
    Chairman Meeks. Thank you.
    We now welcome the testimony of our guests. First, let me 
introduce Mr. Van Tol, who is the chief executive officer of 
the National Community Reinvestment Coalition. Mr. Van Tol has 
been with the NCRC since 2006 and has held a variety of 
leadership positions.
    His work championing fair and responsible banking has 
resulted in nearly $90 billion in new investments in low- and 
moderate-income communities through community benefits 
agreements with 8 banking institutions. He serves on the board 
of the Maryland Consumer Rights Coalition and the executive 
committee of the Americans for Financial Reform.
    He also sits on a variety of advisory boards, including the 
Federal Reserve Board, the Consumer Advisory Council, and 
Fannie Mae and Freddie Mac's Affordable Housing Advisory 
Councils. He is a member of the consumer advisory councils of 
several banks, including Bank of America, Fifth Third, and 
others. Mr. Van Tol received his BA in history and 
international studies from the University of Wisconsin, 
Madison.
    Second, Ms. Baradaran is the Associate Dean of Strategic 
Initiatives and the Robert Cotten Alston Chair in Corporate Law 
at the University of Georgia School of Law. As an associate 
dean, she focuses on diversity and inclusion efforts and 
national and international faculty scholarships recognitions. 
Her teaching portfolio includes contracts and banking law. She 
is the author of books entitled, ``How the Other Half Banks,'' 
and ``The Color of Money: Black Banks and the Racial Wealth 
Gap,'' both published by the Harvard University Press.
    She also has published articles including ``Banking and 
Social Contract,'' ``How the Poor Got Cut Out of Banking,'' and 
the ``New Deal with Black America,'' which was selected for 
presentation in the 2017 Stanford/Harvard/Yale Junior Faculty 
Forum.
    She came to UGA from Brigham Young University where she 
taught banking regulation, property, and administrative law. 
She earned her bachelor's degree cum laude from Brigham Young 
University and her law degree cum laude from NYU, where she has 
served as a member of the New York University Law Review.
    Third, Mr. Odom is senior vice president, policy and 
advocacy, and the Washington Bureau executive director of the 
National Urban League. Mr. Odom currently serves as the 
National Urban League's senior vice president for policy and 
advocacy and executive director of the Washington Bureau.
    Mr. Odom previously served for a decade in the United 
States Senate as Legislative Director for Senator Kamala D. 
Harris of California, as Democratic General Counsel of the 
Committee on Commerce, Science, and Transportation, and as 
General Counsel to Senator Bill Nelson of Florida.
    He also served as a Senior Adviser at the Federal 
Communications Commission, and practiced law at the law firm of 
Dow Lohnes & Albertson, now Cooley LLP. He served as a law 
clerk to the Honorable Henry T. Wingate of the U.S. District 
Court of the Southern District of Mississippi. He is a graduate 
of Louisiana State University and the University of 
Pennsylvania Law School.
    Fourth, Mr. Mitchell is the president and CEO of Industrial 
Bank, and is testifying on behalf of the National Bankers 
Association. Mr. Mitchell leads the largest minority-owned 
commercial bank in the Washington metropolitan area and the 
fifth largest African American-owned financial institution in 
the country.
    Mr. Mitchell is the third-generation president of 
Industrial Bank, which was founded by his grandfather, Jesse H. 
Mitchell, in 1934. After receiving his bachelor's degree in 
economics from Rutgers University in 1984, he began a full-time 
career at Industrial Bank.
    He was elected to the board of directors in 1990 and 
succeeded his father as president in 1993. Mr. Mitchell is the 
immediate past chairman of the National Bankers Association, 
which represents the nation's minority banks. He served two 
consecutive terms as chairman of the NBA and continues to serve 
on the board.
    At the request of Chairman-Elect Preston Kennedy of the 
Independent Community Bankers of America (ICBA), Mr. Mitchell 
now serves on the ICBA 2019/2020 Legislative Issues Committee. 
He is also a former member of the ICBA Safety and Soundness 
Committee.
    Fifth, Mr. Glantz is a senior reporter for Reveal from The 
Center of Investigative Reporting. He is author of the book, 
``Homewreckers,'' to be published by HarperCollins this fall.
    He produces his journalism with impact. His work has 
sparked more than a dozen congressional hearings, the signing 
of new laws, and criminal probes by the DEA, the FBI, the 
Pentagon, and the Federal Trade Commission. His reporting has 
been honored with a host of awards, including the George Foster 
Peabody award, the Selden Ring, and the duPont-Columbia award.
    His work has appeared in many leading media platforms, 
including the New York Times, ``NBC Nightly News,'' ``Good 
Morning America,'' and the ``PBS News Hour,'' where he has 
twice been nominated for a national Emmy award. A recent JSK 
fellow at Stanford University, his previous books include, 
``The War Comes Home,'' ``Washington's Battle Against America's 
Veterans,'' and ``How America Lost Iraq.''
    And, finally, we have Mr. Roberts, president and CEO of the 
National Association of Affordable Housing Lenders (NAAHL), 
which is a national alliance of leading banks, community 
development financial institutions, and other capital providers 
for affordable housing and inclusive neighborhood 
revitalization.
    Mr. Roberts was the Director of the Office of Small 
Business Community Development and Housing Policy at the U.S. 
Treasury Department from 2011 to 2015. He was previously senior 
vice president for policy and program development at the Local 
Initiatives Support Corporation, a leading nonprofit investor 
in low-income community development.
    Mr. Roberts has helped to create the low-income housing tax 
credit, the new markets tax credit, the HOME Housing 
Partnership program, regulatory change to the Community 
Reinvestment Act, the Capital Magnet Fund, and Treasury funding 
for the FHA multifamily risk-sharing loans to finance 
affordable rental housing and bond guarantees for the CDFIs.
    We welcome all of our witnesses today. And I want to remind 
all of the witnesses that your oral testimony will be limited 
to 5 minutes. And without objection, your written statements 
will be made a part of the record.
    I now recognize Mr. Van Tol for 5 minutes to give his oral 
presentation.

 STATEMENT OF JESSE VAN TOL, CHIEF EXECUTIVE OFFICER, NATIONAL 
            COMMUNITY REINVESTMENT COALITION (NCRC)

    Mr. Van Tol. Chairman Meeks, Ranking Member Luetkemeyer, 
and members of the subcommittee, I want to thank you for 
providing me the opportunity to testify. I am the CEO of the 
National Community Reinvestment Coalition, which, along with 
its 600 grassroots member organizations nationwide, champions 
fairness and fights discrimination in banking, housing, and in 
business.
    I want to start by saying that CRA has been effective. 
Federal, academic, and NCRC's own studies have documented the 
way CRA has increased the provision of mortgage loans, small 
business loans investments, and other financial services in 
low- and moderate-income neighborhoods and to low- and 
moderate-income people.
    But measuring CRA's impact involves proving a 
counterfactual: What would happen if it didn't exist? The 
Federal Reserve Bank of Philadelphia found that a loss of CRA's 
Census tract designation leads to a 10 to 20 percent decrease 
in mortgage lending, and we see a similar thing with small 
business lending.
    Conservatively, we estimate a $52 billion to $105 billion 
loss or shift in lending in LMI areas nationwide were CRA to be 
significantly weakened or assessment areas transformed. All 
told, banks have done over $1 trillion in community development 
lending since 1996.
    The impact is not just by the largest banks. Even 
intermediate to small banks finance about $3 billion annually 
in community development projects or about the same amount of 
annual funding as the community development block grant program 
in its entirety.
    Though CRA could do more for rural America, we also see a 
positive impact there. For example, in Appalachia we found that 
CRA-regulated lenders made nearly $2.5 billion annually in 
community development loans and investments.
    But CRA has been limited by changes in the market. CRA's 
overall impact has declined as the share of loans covered by 
CRA has declined. In 1993, 41 percent of mortgage loans were 
directly covered by a CRA review. By 2016, only roughly 30 
percent of mortgages were covered.
    There are two driving forces here: increased lending by 
nonbanks; and more out-of-assessment area lending by CRA-
regulated banks. This trend is likely to continue and will be 
exacerbated by the growth of financial technology firms with no 
CRA obligation.
    The fact that regulators are examining less and less bank 
lending on CRA exams limits its impact to only a portion of the 
market. Most nonbank lenders trail CRA-regulated banks in 
lending to LMI borrowers in tracts. In addition, nonbank 
lending is consistently more likely to be high cost than bank 
lending. For example, government-insured loans to LMI borrowers 
by nonbanks were higher cost twice as often as loans to the 
same borrowers made by banks.
    Weak enforcement and implementation has stymied the law. As 
effective as CRA has been as currently structured and enforced, 
it has not been enough to reverse the effects of redlining and 
discrimination: 98 percent of banks receive passing CRA grades.
    It hasn't always been this way. The Clinton Administration 
rigorously enforced CRA, failing as many as 10 percent of banks 
at one point. Then-Comptroller Eugene Ludwig noted in 1997 
that, ``Since 1993, home mortgage loans to low- and moderate-
income Census Tracts have risen by 33 percent in just 4 years. 
Mortgage loans to minorities are up almost 38 percent with 
African Americans and Hispanics accounting for most of that 
gain.''
    CRA enforcement has often been encouraged by community 
activism and by DOJ litigation then leading to regulatory 
action. The differences between the tenure of Comptroller Curry 
and Comptroller Otting are also worth noting. Comptroller Curry 
downgraded CRA ratings for several banks for fair-lending 
violations and placed conditions on bank mergers.
    In contrast, his OCC successors issued guidances weakening 
CRA enforcement, including imposing limits on downgrades for 
fair-lending violations and speeding up mergers. Not only has 
the OCC stepped away from conditional merger approvals, but it 
is also approving them more quickly.
    CRA regulatory reform must be consistent with the law and 
the legislative history. All three regulators have weighed into 
the discussion over CRA regulatory reform with differing 
approaches.
    The OCC has suggested a transformational approach to reform 
with some ideas that would weaken CRA significantly. Voices 
across the spectrum have impugned the OCC's notion of a single 
metric or one ratio that could overly weight a rigid 
quantitative analysis by regulators and facilitate more CRA 
grade inflation.
    The approach would undermine the qualitative local 
analysis, which is critical to CRA, that is designed to assess 
whether banks are meeting credit needs in all communities and 
then in the neighborhoods they are chartered to serve.
    I look forward to making additional recommendations on ways 
to strengthen the Community Reinvestment Act during the Q&A 
session. Thank you.
    [The prepared statement of Mr. Van Tol can be found on page 
114 of the appendix.]
    Chairman Meeks. Thank you. Ms. Baradaran, you are now 
recognized for 5 minutes.

STATEMENT OF MEHRSA BARADARAN, PROFESSOR OF LAW, UNIVERSITY OF 
                     GEORGIA SCHOOL OF LAW

    Ms. Baradaran. Chairman Meeks, Ranking Member Luetkemeyer, 
and Chairwoman Maxine Waters, thank you very much for having me 
here.
    In passing the CRA in 1977, Senator William Proxmire stated 
that the Act was based on the widely shared assumption that a 
bank's public charter conveys numerous economic benefits, and, 
therefore, it is fair for the public to ask for something in 
return.
    The underlying theory of the CRA is that banks have duties 
to the public because they benefit from significant government 
subsidies. This bank-government social contract seems to have 
been forgotten entirely.
    Banks enjoy a monopoly on the Federal Reserve payment 
system, receive subsidized funding through FDIC-insured 
deposits, make loans supported by Federal guarantees, and 
invest in mortgage-backed securities markets enabled by GSCs. 
And all of this still doesn't cover the bailouts when the 
industry fails or the unprecedented monetary policy actions of 
the Federal Reserve, including trillions of dollars in 
quantitative easing.
    Banks need this support, without which their customers 
would lack sufficient trust to permit them to function 
properly, for trust is the currency of banks. In return, banks 
are to serve as the engines at the center of the economy. They 
provide credit, financial services, and liquidity. It is their 
role to connect the people to commercial markets and administer 
government credit policy and monetary policy.
    For most of U.S. history, banks were forced to stay local, 
small, and safe so that they would meet the needs of their 
communities. Yet, during the deregulatory era started right 
after the CRA was passed and seems to still be ongoing, these 
restrictions were eroded. Wave after wave of deregulatory 
legislation completely transformed the banking sector to one 
that is large, complex, laden with risks, very profitable, and 
highly competitive.
    Small community banks have struggled to survive this 
hypercompetitive environment. As banks grew larger through 
mergers and became more efficient, they dropped their 
unprofitable branches and their unprofitable customers. Banks 
also shed their public duties. All of this deregulation 
happened slowly and promised more efficiency. But at the end of 
the day, the government was left holding the bag. Because banks 
operate using, in the words of Louis Brandeis, ``other people's 
money,'' they are not like other businesses.
    Congress and regulators therefore must be watchful that 
reforms promising modernization and efficiency do not become a 
Trojan Horse, hiding even more deregulation, relieving banks of 
their last remaining public duties. Of course, the CRA should 
be updated, and compliance should be transparent.
    But when regulators promise changes that have ease of 
compliance or efficiency, we must step back and ask a few 
questions: Efficient for whom? Why should efficiency be our 
primary concern? More importantly, what kind of banking sector 
would best meet the needs of the public, and how can we design 
laws to achieve that outcome?
    We need a banking system that provides equal access to 
credit and services for all. The problems that the CRA was 
meant to address have not been solved, and we must remember 
that these problems that we are talking about are not just 
numbers.
    Poverty, exclusion, predatory lending, segregation, and an 
intergenerational racial wealth gap affect human lives and real 
communities. These are the communities that we are talking 
about when we are talking about CRA duties. Low-cost bank 
accounts and credit products are not a cure to poverty, but 
they do help.
    These problems are too large and too complex and too 
entrenched for one law or one industry to solve. Yet, the 
democratization of banking is necessary. It is still, I think, 
too important a public imperative to be left solely to the 
private sector.
    If we are serious about financial inclusion, it is time 
that we consider a public option. Insofar as the States enable 
credit markets, deposit accounts, and payment systems, all 
Americans should have equal access to these public utilities.
    But short of that, banks have public duties because they 
benefit from significant public support. The CRA is the only 
law that places affirmative duties on banks. Most major banking 
laws have some sort of public benefit test. In other words, 
before a bank is supposed to merge or add any other activity, 
all of the laws--the Bank Holding Company Act, the National 
Bank Act--require that the regulators ask, what is the benefit 
to the public? In other words, when a bank merges, will 
communities lose branches?
    Today's CRA is meant to encapsulate the entirety of this 
public benefit test. In recent years, bank mergers have only 
increased, as has disinvestment from LMI communities. The Fed 
just set two records last year: the highest ever approval rates 
for M&A proposals; and the quickest-ever time to approval, 
especially for mergers that received adverse comments from the 
public. The only question asked was whether the bank was in 
compliance with the CRA. That is not enough.
    A strong CRA should be one step in an effort to match the 
large inequalities in the credit system, the conglomeration of 
the banking sector, and the historic injustice of the racial 
wealth gap. Thank you.
    [The prepared statement of Ms. Baradaran can be found on 
page 46 of the appendix.]
    Chairman Meeks. Thank you. Mr. Odom, you are recognized for 
5 minutes.

 STATEMENT OF CLINT ODOM, SENIOR VICE PRESIDENT AND EXECUTIVE 
       DIRECTOR, NATIONAL URBAN LEAGUE WASHINGTON BUREAU

    Mr. Odom. Good morning, Chairman Meeks, Ranking Member 
Luetkemeyer, and Chairwoman Waters. Thank you for the 
opportunity to present the National Urban League's views on the 
Community Reinvestment Act. My name is Clint Odom, and I am the 
National Urban League's senior VP of policy and director of its 
historic Washington Bureau.
    Established in 1910, the National Urban League is the 
nation's oldest and largest civil rights and direct services 
organization. Each year, we serve 2 million people through 90 
affiliates in 36 States and the District of Columbia. Our views 
and recommendations are based on decades of direct experience 
in urban communities across the country and our historic role 
in documenting and fashioning remedies to root out the 
pernicious practice of redlining.
    Congress passed the CRA because of concerns that federally 
insured banking institutions were not making enough credit 
available in the communities they served. Disinvestment 
practices allowed depository institutions to accept deposits 
from African Americans in the inner city but reinvest them in 
more affluent, suburban areas.
    Faced with substantial evidence of redlining, Congress 
decided that market forces alone could not break down 
residential segregation patterns. Thus, the CRA was enacted--
and we will hear this a lot today--``to reaffirm the obligation 
of federally chartered or insured financial institutions to 
serve the convenience and needs of their service areas and to 
help meet the credit needs of the localities in which they are 
consistent with the prudent operation of the institution.''
    Redlining prevented African-American and other communities 
from securing affordable homes and mortgages in decent 
neighborhoods and purposely segregated communities. Segregated 
into slums, African Americans were concentrated into poverty by 
way of intentional discriminatory policies.
    They were denied credit to purchase homes, start small 
businesses, and to meet everyday living expenses. Blight, 
crime, and decreased property values often ensued. Cities were 
left behind with no adequate tax base for basic services. With 
no desire to invest in these communities, many African-American 
communities continue to deteriorate today, as you will hear 
from other panelists.
    To be clear, the CRA is one of the most important civil 
rights and economic justice laws of the 20th Century. In the 
21st Century, however, the law is in dire need of reform to 
better serve low- to moderate-income communities.
    CRA-regulated institutions have not always met the needs of 
their communities, allowing an array of nonbanks to enter the 
marketplace, many of which provide high-cost and often 
predatory products. Advocates in industry agree the CRA can and 
must do more.
    My submitted testimony offers several reform suggestions 
for the committee's consideration. I will highlight three here. 
First, modernizing the CRA service test to measure how well 
banks are serving low- to moderate-income communities. The 
service test must do more to incentivize banks to offer credit 
products. There is a problem when 98 percent of CRA-regulated 
institutions get a satisfactory or outstanding rating.
    Second, developing regulations to encourage majority 
institutions to invest in minority-owned institutions. We agree 
with the American Bankers Association that, ``Minority-owned 
institutions were pioneers in helping underserved neighborhoods 
before the CRA existed, and their perseverance in serving those 
markets has made them worthy partners in leading further 
efforts to build stronger, more economically vibrant 
communities.'' It is past time for the agencies to adopt 
regulations that recognize and thereby encourage investments in 
and support of minority institutions by majority institutions, 
something that Congress authorized years ago but still has not 
implemented in the CRA process.
    Third, including nonbanks under CRA regulation. Nonbanks 
have taken on the responsibility of serving LMI communities. 
The only place banks have a stronghold in LMI lending is their 
assessment areas. Including nonbanks under CRA's purview would 
help ensure LMI communities' needs are met while limiting 
access to excessive risk-based pricing.
    Immediately following the Civil War, Congress enacted the 
Civil Rights Act of 1866, which stated that every citizen of 
the United States, including former slaves, had the right to 
inherit, purchase, sell, hold, or convey property, both real 
and personal. As a nation, we have been struggling ever since 
to get this right.
    The CRA is as relevant today as it was in 1977, and we urge 
Congress through its oversight powers to do more to access 
affordable credit and quality investments in communities of 
color. Thank you.
    [The prepared statement of Mr. Odom can be found on page 91 
of the appendix.]
    Chairman Meeks. Thank you.
    Mr. Mitchell, you are now recognized for 5 minutes.

STATEMENT OF BENSON DOYLE MITCHELL, JR. BENSON DOYLE MITCHELL, 
 JR., PRESIDENT AND CEO, INDUSTRIAL BANK, TESTIFYING ON BEHALF 
              OF THE NATIONAL BANKERS ASSOCIATION

    Mr. Mitchell. Good morning, Chairman Meeks, Ranking Member 
Luetkemeyer, Chairwoman Waters, and members of the 
subcommittee. Thank you for this opportunity of allowing me to 
testify on the Community Reinvestment Act. It gives me great 
hope that one of this committee's first hearings of the 116th 
Congress is shining light on this critical issue.
    My name is B. Doyle Mitchell, Jr., and I am president and 
CEO of Industrial Bank. Industrial Bank has been serving 
individual customers and small businesses in Washington, D.C., 
and Prince George's County, Maryland, since 1934.
    I am also on the board of the National Bankers Association. 
The NBA is a leading trade association for the country's 
Minority Depository Institutions, or MDIs. Our mission is to 
serve as an advocate for the nation's MDIs on all legislative 
and regulatory matters concerning and affecting our member 
institutions as well as the communities that we serve.
    Many of our member institutions are also community 
development financial institutions, CDFIs. And many of our 
member institutions have become banks of last resort for 
consumers and businesses who are underserved by traditional 
banks and financial services providers.
    The National Bankers Association supports a strong CRA. In 
enacting CRA, Congress stated that the purpose of the CRA was 
to ``ensure that regulated financial institutions demonstrate 
that they serve the convenience and needs of the communities in 
which they are chartered to do business.'' As such, these 
institutions have a continuing and affirmative obligation to 
help meet the credit needs of the local communities in which 
they are chartered.
    While the CRA has made great strides in ensuring access to 
credit in low- and moderate-income communities and among 
minority and low-income borrowers, systemic economic and social 
challenges remain, perpetuating a lack of access to fair credit 
services for many, and allowing predatory providers to thrive. 
Given growing economic inequity in urban, rural, and Native 
American communities, it is important to get CRA right.
    We strongly support the purposes and objectives of CRA. We 
strongly support modernization that ensures CRA does not lose 
effectiveness for LMI communities and that it also creates a 
regulatory framework that streamlines financial institutions' 
ability to comply with CRA. The success of CRA reform should be 
measured by whether it will result in more credit and services 
delivered to LMI communities and doesn't create unnecessary 
regulatory burdens.
    We recommend updating and preserving the flexibility. NBA 
members believe that the current framework for CRA is 
effective, but it needs modernization to reflect changes in the 
financial services landscape. We strongly agree with the notion 
expressed by regulators and lawmakers alike that CRA 
examination should be conducted in a more clear, consistent, 
transparent manner. We believe, however, that this result can 
be achieved by modifying the existing framework.
    We have great concerns about the proposed metric-based, 
single-ratio framework outlined in the OCC's ANPR, and, thus, 
we oppose its adoption. We believe that the proposed single-
ratio metric is too simplistic to fit all banks. We believe 
that a single ratio would encourage a minimalistic approach to 
CRA compliance where financial institutions would become more 
focused on hitting their ratio rather than thinking 
comprehensively about potential approaches for meeting credit 
needs of LMI communities.
    We believe that CRA can continue to be a powerful tool to 
promote investment in LMI communities, and to this end, we 
offer the following recommendations to the subcommittee on this 
very important topic: First. create an MDI investment tax 
credit that can accompany the CRA provisions encouraging 
majority banks equity investments in MDIs.
    The NBA strongly recommends enhanced interagency CRA 
training for examiners. The NBA recommends the creation of a 
robust public database of CRA case studies and peer-performance 
data. We strongly recommend that CRA encourage banks to provide 
long-term support to MDIs and CDFIs, as we are established 
institutions that have a successful history of serving the 
communities that are most distressed.
    We recommend that bank investors receive significant and 
consistent CRA credit throughout the life of an investment, not 
just the origination of it. We recommend that studies of the 
assessment areas covered by CRA and the CDFI fund be 
streamlined. We also recommend that you streamline the 
reporting requirements of CRA and CDFI. The NBA recommends that 
CRA help promote financial literacy and inclusion among LMI 
populations, as well as unbanked, underbanked, and other 
vulnerable populations.
    The NBA applauds the subcommittee for holding this 
important hearing, and for the Full Committee's ongoing efforts 
to assert and reassert the importance of CRA in the modern 
banking marketplace. And we stand ready to answer any 
questions.
    [The prepared statement of Mr. Mitchell can be found on 
page 71 of the appendix.]
    Chairman Meeks. Thank you.
    Mr. Glantz, you are now recognized for 5 minutes.

  STATEMENT OF AARON GLANTZ, SENIOR REPORTER, REVEAL FROM THE 
               CENTER FOR INVESTIGATIVE REPORTING

    Mr. Glantz. Chairman Meeks, Ranking Member Luetkemeyer, 
Chairwoman Waters, I am pleased to join you and the rest of the 
subcommittee today to speak about our kept-out investigation 
into modern day redlining.
    Reveal from the Center for Investigative Reporting is the 
oldest nonprofit organization in the country focused on in-
depth investigative journalism, and our weekly radio show airs 
on more than 400 public radio stations each week. My testimony 
today was prepared with my colleague, Emmanuel Martinez.
    First, a word about why we launched our investigation. We 
asked a straightforward question: Since 1977, banks have been 
required by the Community Reinvestment Act to lend in low-
income neighborhoods and to low-income people, and yet, 40 
years on, the homeownership gap between Blacks and whites is as 
great as it was during the Jim Crow era.
    We wanted to know why. Why wasn't the Community 
Reinvestment Act reversing the historic damage of racially 
discriminatory redlining? So to find out, we analyzed 31 
million mortgage records, nearly every loan application in 
America in 2015 and 2016.
    And we found 61 metro areas across the country where people 
of color were more likely to be denied a conventional mortgage 
loan even when they made the same amount of money, tried to 
take out the same size loan, and buy in the same neighborhood 
as their white counterparts: Atlanta; Detroit; Jacksonville; 
St. Louis; Tulsa; Tacoma; base towns like Killeen, Texas; Santa 
Fe, New Mexico; and right here in Washington, D.C.
    And yet nearly every bank receives a satisfactory or 
outstanding grade under the Community Reinvestment Act. So we 
investigated further, and we found lenders were exploiting 
three big loopholes.
    The first we call the ``gentrification loophole.'' Because 
CRA is race-neutral, we found that many banks loaded up making 
a ton of loans in rapidly gentrifying neighborhoods that have 
historically been home to communities of color. We found that, 
in these neighborhoods, banks offered generous terms: low 
downpayments; a pass on mortgage insurance; even looking the 
other way on blemishes on applicants' credit reports. But 
almost all of those loans went to white newcomers. When people 
of color tried to get those same loans, we found they were more 
likely to be denied.
    Second, the ``bank branch loophole.'' Other people here 
have talked about how old CRA is, and how it only applies to 
banks when they have a branch in the city that takes deposits. 
We found that in Boston, Philadelphia, and Washington, D.C., 
the biggest bank in America, JPMorgan Chase, was not assessed 
under the Community Reinvestment Act.
    Chase has a physical presence in these cities. It had an 
office for the wealthy here in D.C. across the street from the 
White House, but it wasn't technically a branch, and so it 
didn't trigger a CRA assessment. The result is that, here in 
D.C., Chase made more than 1,000 conventional home purchase 
loans in 2015 and 2016, of which only 23 were to African 
Americans and 35 were to Latinos.
    Now, after we published our investigation, Chase announced 
plans to expand its network in all three cities, and it will 
now be following the Community Reinvestment Act in those 
markets, but the loophole is still there.
    And the third loophole is about nonbanks. The Community 
Reinvestment Act doesn't apply to nonbank lenders at all, and 
they make up an increasing share of the mortgage market. We 
took a look at the mortgage companies controlled by Warren 
Buffet's Berkshire Hathaway.
    We found that across the country, Berkshire Hathaway's 
mortgage lenders put most of their offices in white 
neighborhoods, hired a primarily white staff of mortgage 
consultants, and lent overwhelmingly to white borrowers in 
majority white neighborhoods.
    For example, in Atlanta, Berkshire's company made 1,300 
loans for conventional home purchase in 2015 and 2016, 
including just 63 loans to African Americans and 46 to Latinos. 
And Berkshire is not evaluated under CRA.
    So, finally, as a journalist at a nonprofit, nonpartisan 
news organization, I want to make one thing very clear: We take 
no position on any policy proposal. We are not here to offer 
solutions or advice. We are here to present the facts we 
uncovered in our 2-year loan investigation. One fact is that we 
found persistent redlining across this country, and another 
fact is that nearly every bank gets a satisfactory or 
outstanding grade under the Community Reinvestment Act. Thank 
you.
    [The prepared statement of Mr. Glantz can be found on page 
63 of the appendix.]
    Chairman Meeks. Thank you.
    And, Mr. Roberts, you are now recognized for 5 minutes.

  STATEMENT OF BENSON F. ROBERTS, PRESIDENT AND CEO, NATIONAL 
           ASSOCIATION OF AFFORDABLE HOUSING LENDERS

    Mr. Roberts. Thank you, Mr. Chairman. Good morning, Ranking 
Member Luetkemeyer, Chairwoman Waters, Ranking Member McHenry, 
and the rest of the subcommittee members as well.
    The National Association of Affordable Housing Lenders is 
the only alliance of banks, CDFIs, and other capital providers 
for affordable housing and inclusive neighborhood 
revitalization.
    We support a strong CRA because America's economy, 
financial system, and society can succeed only if every person 
in every community has the opportunity to contribute to them 
and benefit from them. CRA provides the capital that is vital 
to the economic health of low- and moderate-income people and 
communities.
    In 2016 alone, banks made 3.6 million CRA loans totaling 
$419 billion. That is a lot of money. That includes 2.7 million 
small business loans for $172 billion, 724,000 home mortgage 
loans for $108 billion, 26,000 community development loans for 
$96 billion, 13,000 multifamily housing loans for $33 billion, 
and 108,000 small farm loans for $10 billion.
    Importantly, CRA is completely consistent with safe and 
sound lending principles as the law requires and as experience 
demonstrates. CRA is sustainable for communities and borrowers 
and banks alike.
    But CRA could do far more. Banks are willing to make more 
loans and investments if they will get CRA credit for doing 
them.
    The bad news is that the CRA regulation is now 24-years-
old. It has fallen far behind fundamental changes to the 
banking industry, local community needs and opportunities, and 
the practice of affordable housing and community development, 
all of which have evolved greatly over the last generation.
    When the current CRA rule was finalized in 1995, Congress 
had just authorized interstate banks. Today, interstate banking 
comprises a majority of the banking system's assets. These 
days, mobile banking and other Fintech innovations are helping 
banks to serve low- and moderate-income people and communities 
better as a convenient complement to branches, which also 
remain very important.
    And at the same time, CRA has not kept pace with 
reinvestment needs and opportunities. Low- and moderate-income 
people and communities are missing out on many loans and 
investments either because it is unclear that they will count 
for CRA or their location does not fit outdated CRA rules.
    The good news is that many important improvements are 
possible, even within the current statutory framework. One area 
ripe for expansion is the financing of community development. 
Under CRA, community development includes affordable housing, 
economic development, community services, neighborhood 
stabilization and revitalization, and disaster area recovery.
    CRA has served as a foundation for an entire generation of 
successful community development practice and public policies, 
including the low-income housing tax credit, new markets tax 
credit, the CDFI fund, and the HOME Investment Partnerships 
program, all of which are far more effective because of the 
participation of banks under the CRA. In fact, you could say 
CRA is the oxygen that community development breathes.
    To encourage more financing for community development, CRA 
policy should allow all large banks to have a consolidated 
community development test rather than fragmenting community 
development among the three current tests of lending investment 
and service; give banks credit for community development 
activities nationwide if they have already served their local 
area satisfactorily; evaluate the substance of community 
development activities in all communities, including rural 
communities and smaller metro areas where the current 
examination process effectively discounts and disregards those 
activities; and clarify the treatment of important activities, 
like unsubsidized rental housing, economic development in 
struggling parts of the country, and infrastructure, so that 
banks can be confident when they make a loan or investment that 
it will count for CRA. CRA should also provide more credit for 
long-term community development loans and examine branchless 
banks on a national basis rather than as local banks.
    That concludes my testimony. Thank you.
    [The prepared statement of Mr. Roberts can be found on page 
100 of the appendix.]
    Chairman Meeks. I thank each of our witnesses for your 
excellent testimony. And I now recognize myself 5 minutes for 
questioning.
    And I will start out with Mr. Van Tol. In listening to the 
reporting of Mr. Glantz where he talked about the three 
loopholes, my concern has long been discrimination that has 
gone throughout and the new style of banking that is going on 
now, whether we are talking about Fintech or whether we are 
talking about, you know, there are a lot of banking deserts 
taking place.
    What would you think is the best way, as we talk about 
modernizing CRA--and we are in the middle of that--to try to 
eliminate some of those loopholes? And do you agree with Mr. 
Glantz's testimony as far as the reporting that he has done 
with those three items?
    Mr. Van Tol. I agree that those loopholes are an issue. And 
I think in particular, what we would say is that CRA needs to 
cover more loans and more lenders so CRA doesn't apply to 
mortgage companies, which today are a significant portion of 
the market.
    In fact, as I said in my testimony, CRA only applies 
covering about 30 percent of mortgage loans. That is loans that 
banks make in their assessment areas, and it is loans that 
mortgage companies make.
    And so we need to apply CRA: one, to mortgage companies; 
and two, assessment areas should be drawn to cover the vast 
majority of a bank's lending. When banks are making a lot of 
loans outside of their assessment areas, effectively what they 
are doing is skirting scrutiny of CRA by doing that, and so we 
need to adjust the way that we look at both of those things.
    Chairman Meeks. And would you also agree that we can't just 
go--I was concerned too by the initial findings of the OCC, 
although I give them credit for at least starting some of this 
dialogue--with the metric base, single ratio, that we have to 
be more imaginative than that to make sure there are more items 
that are included--would you concur with that?
    Mr. Van Tol. I concur. One ratio is really problematic. 
What it says is you take the sum of activities a bank does to 
fulfill CRA measured by some measure of capacity, their assets 
or deposits, and you do simple division, and if they get above 
a certain threshold, you pass.
    What that would do is it would drive a lot of activity away 
from local communities, which was the original intent of CRA. 
It would drive activities to the most profitable, lowest risk, 
lowest effort type activities, likely very large mortgages in 
low- and moderate-income Census Tracts to middle- and upper-
income people because that is how you would sort of gain a 
dollar figure amount.
    So we are not supportive. We are opposed to the one metric. 
We think it would be detrimental for low- and moderate-income 
communities and for communities of color.
    Chairman Meeks. Now, Mr. Mitchell, I am concerned also--you 
are a CDFI, and you talked about the strengthening of CRA. And 
I know some of the larger banks don't have the same model that 
you utilize because CDFIs are basically there to help the 
communities.
    How would you talk about the differences between how the 
CRA should work and apply, because we even have some CDFIs, not 
yours, that have not complied or have--and I found it amusing 
that some CDFIs, more so than some of the bigger banks, do not 
get CRA credit where the big banks, generally, I think some 96 
percent, all were found either satisfactory or better as far as 
CRA's concern.
    Mr. Mitchell. One of the concerns, Mr. Chairman, is that 
CRA and the CDFI requirements don't sync up. There are loans 
that can get CDFI credit that will not get CRA credit and vice 
versa.
    The assessment areas can be different. If we have an 
assessment area for CRA purposes, it may or may not sync up. 
Generally it would sync up with the CDFI Census tracts. But 
there are differences between the two.
    Chairman Meeks. Should they sync up?
    Mr. Mitchell. Yes, absolutely. And so should the reporting 
requirements.
    Chairman Meeks. Mr. Odom, I want to--because what is 
critically important and central, I think, is access to credit. 
And when I look at--I am running out of time already--what took 
place with the Great Recession, can you describe how that 
affected it, particularly in African-American and Hispanic 
communities, the loss of wealth and whether CRA could have had 
a hand in helping us if it was assessed properly?
    Mr. Odom. The Great Recession had a deleterious on Black 
home ownership. Lots of African Americans, minorities and other 
people across the country lost their homes. A lot of bank 
branches closed during that same period of time. There has been 
a lot of reference here to banking deserts. Some of that root 
cause of banking deserts relates back to the Great Recession.
    A stronger CRA, especially one that doesn't--where 
policymakers don't blame the CRA for the mishaps, certainly 
like the Great Recession, goes a long way in avoiding those 
kinds of problems in the future.
    Chairman Meeks. Thank you. I now recognize the ranking 
member of the subcommittee, Mr. Luetkemeyer, for 5 minutes for 
questions.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    We have a law that is 40 years old, and everything needs to 
be reformed. I think, over the course of 40 years--I don't know 
anything that can go 40 years without some sort of tweaks to 
it.
    I think all of you indicated in your testimony that we need 
to look at different ways to be able to tweak this law, and I 
support that.
    One of the things that has happened is the--I think, as our 
ranking member indicated, we are living in a world now with 
these sorts of devices that, whenever the CRA was implemented, 
those were probably not even on the drawing board yet.
    So, with regards to the many innovations in Fintech, which 
have increased access to credit for Americans, what changes can 
be made to CRA that will promote innovation in lending while 
also ensuring that banks provide services to the communities in 
which they reside, Mr. Mitchell?
    Mr. Mitchell. Well, as I said, one of the things that we 
believe strongly in at the NBA and in the CDFI banks is that 
larger banks, I think, as one of my colleagues mentioned, can 
invest in MDIs. We have historically had a wonderful history 
and a successful history of investing in CRA-designated areas 
and CDFI-designated areas, and we believe we do it well.
    Our history has shown that we--Industrial Bank is the fifth 
oldest Black-Owned institution in the country, and yet there 
are others much older than us. And so we are proponents that 
the CDFI fund, and large banks should be encouraged under CRA 
to invest in our institutions.
    Mr. Luetkemeyer. Mr. Roberts, do you want to answer that 
question as well?
    What do you think--how should regulators consider CRA 
credit for bank partnerships with nonbank institutions and 
Fintech firms? How would you go about that?
    Mr. Roberts. I think there are tremendous opportunities for 
those kinds of partnerships. And they can help further extend 
access to depository accounts as well as mortgages and small 
business lending. And those partnerships should be covered by 
CRA because the banks are playing important roles in them.
    In order to do that, though, there does need to be some 
revision to the way assessment areas work so that those 
activities can be recognized.
    Mr. Luetkemeyer. This discussion that I am having here goes 
now into an area about, is a lending institution providing 
different kinds of products and services across the board? This 
is one of the things about which I had long discussions with 
Mr. Otting at the Comptroller's Office with regards to his 
proposal.
    And I think part of his proposal is to try and enlarge the 
number of things that can be counted toward a CRA, to be able 
to encourage investment in different areas that have not been 
allowed in the past, things like churches, community buildings 
and groups, infrastructure, the number of ATMs and facilities 
in areas. And I think you mentioned, Mr. Roberts, also 
community development and affordable housing.
    So can you elaborate a little bit on how you would 
anticipate some of that coming out? Because I think if there is 
credit for it, I think there is encouragement in those areas 
for banks to be a part of that in an area--in lending in an 
area where maybe they haven't been in the past or didn't get 
credit for it.
    Mr. Roberts. I think you are very correct.
    The key here--I would say there are two key elements. The 
first is we have to make sure that these activities are 
benefiting low- and moderate-income people and communities. And 
to the extent that they are broader, there can be a pro rata 
approach so that the focus on low- and moderate-income is 
maintained within the broader community.
    And, second, there needs to be a lot more clarity about 
what counts.
    Banks often won't know until an examiner comes through 3 or 
4 years down the line whether an activity is going to count for 
CRA. So, if you are a bank and you are operating in dozens or 
even hundreds of assessment areas, and you have multiple 
metrics to hit in each of those areas, you really don't have 
time to focus on things that might not count.
    Mr. Luetkemeyer. That is interesting. Because I think a lot 
of times the institutions are not given credit for being part 
of the community and doing those things. This is one of the 
things that I think that Comptroller Otting is looking to do, 
is he recognized that there is a lot of lending going on that 
institutions are not being given credit for, that is enhancing 
the ability of a community to be successful, to grow, to 
provide opportunities for people.
    And I guess my last concern would be nonbank regulation. 
Would any of you like to talk for just a second with regard to 
the high cost of the predatory products of nonbank lenders, 
what we need to do to get ahold of that?
    Mr. Van Tol?
    Mr. Van Tol. Well, I think we need to apply CRA to them. 
Look, CRA-regulated lending is safer, sounder, and it is 
cheaper.
    Mr. Luetkemeyer. What effect do you think it would have on 
those lending products?
    Mr. Van Tol. On nonbank lending products?
    Mr. Luetkemeyer. Yes.
    Mr. Van Tol. I think that bringing those companies into 
CRA's scrutiny would be a positive thing.
    Mr. Luetkemeyer. Would it curtail the products that are 
being offered?
    Mr. Van Tol. Pardon me?
    Mr. Luetkemeyer. Would it curtail the products being 
offered and raise costs?
    Mr. Van Tol. I don't believe so, no.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentlelady from California, the 
chairwoman of the full Financial Services Committee, Ms. 
Waters, for 5 minutes.
    Chairwoman Waters. Thank you very much, Mr. Chairman. I 
would like to continue this discussion with Mr. Van Tol about 
extending the CRA to these nonbanks.
    I was informed that more than half of all of the mortgages 
issued last year came from nonbanks, such as Quicken Loans, and 
they have a larger share of the market than before the crisis, 
and that 6 of the 10 mortgage lenders are nonbanks.
    And so, while I absolutely support credit unions and the 
ability to serve their constituency, all of that, I mean, fair 
is fair.
    Can you tell me what has been the response to the question 
from not only members but from the nonbank lenders themselves 
about CRA? Has there been any real discussion that you can 
share with us?
    Mr. Van Tol. Sure. Let me go back to something that 
Professor Baradaran said. She outlined the ways in which banks 
are really subsidized by the Federal Government. And I will 
note that the entire system of mortgage lending in a way is 
subsidized by the Federal Government. At the height of the 
crisis, we extended $30 trillion in loans, investments, and 
guarantees to ensure that liquidity continued to flow 
throughout the mortgage system.
    So I would say that, in fact, mortgage lenders are 
subsidized in a similar way, and the rationale to apply CRA to 
them exists. They are not in favor of it. I think some of 
them--we certainly see an institution like Quicken Loans does 
many CRA-type things in its headquarters City of Detroit, and 
would probably do relatively well on a CRA exam.
    Many of the lenders--or higher-cost lenders are not doing 
the same kinds of positive things that they are, and we would 
be in support of applying CRA obligations to the whole market. 
We believe it brings scrutiny that will drive down the price of 
those mortgages, and will encourage mortgage lenders to do more 
positive things for low- and moderate-income communities and 
communities of color.
    Chairwoman Waters. Thank you.
    I want to move to Mr. Glantz. I want to thank you for the 
research that your organization has done. And much of what you 
have said is absolutely known by this Congress and that we need 
to take that research into consideration in forming 
legislation.
    What is it that would allow a bank operating, for example, 
as you described with Chase in Washington, D.C., to be called 
not a branch?
    Mr. Glantz. The Chase office that was across the street 
from the White House, still is, is part of their wealth 
management operation. And in the FDIC dataset, it is identified 
as a limited service office. So it is making loans to the 
clients who go to that institution.
    It is not a branch that takes deposits, however. And the 
way CRA is written, a branch is only a branch if it takes 
deposits.
    So, that is what Chase was doing in these three markets we 
mentioned: Philadelphia; Boston; and Washington, D.C. And as I 
also mentioned, they have since announced a branch expansion in 
those cities.
    Chairwoman Waters. Is it fair to conclude that, despite the 
fact it does not take deposits, that when you look at the 
overall company and you consider that their profits come from 
maybe all over the country and from various communities, is it 
fair to consider that perhaps that should not be the definition 
or the criteria for CRA enforcement, that we should be looking 
at making them CRA-enforced also?
    Mr. Glantz. As I said, Madam Chairwoman, we are not here to 
make policy recommendations. But I would note that Chase was a 
very active market player in D.C., Philadelphia, and Boston, 
and in fact made over 1,000 conventional home purchase loans 
during our study period and only 23 to African Americans. So 
they were not assessed, but they were an active market player.
    Chairwoman Waters. And do you have any comments about the 
nonbanks, any research?
    Mr. Glantz. One of the things that we noticed when we were 
out on the streets--a lot of our field reporting focused on 
Philadelphia, and that is how we ended up looking at Trident 
Mortgage, which is the Berkshire Hathaway affiliate there. It 
was the largest home purchase lender in Philadelphia, but it 
lent overwhelmingly to white borrowers.
    And it did not deny very many applications from people of 
color. It simply did not get applications from people of color. 
And that is what caused us to begin looking into Trident, 
because it was the market leader, and it was not seeing any 
applications from people of color.
    Chairwoman Waters. Thank you so very much. I went over my 
time.
    I yield back the balance of my time, and I thank you very 
much.
    Chairman Meeks. The gentlelady yields back her time.
    I now recognize the gentleman from North Carolina, the 
ranking member of the full Financial Services Committee, Mr. 
McHenry, for 5 minutes.
    Mr. McHenry. Thank you, Mr. Chairman, and thank you for 
holding this hearing today. I think it is important for us to 
note that the Community Reinvestment Act at the time was a 
landmark piece of legislation that has for decades served us 
well.
    And we have had this technology shift, a dramatic shift, 
actually born out of mainly the iPhone, right? And I mentioned 
in my opening statement, 95 percent of Americans have a 
cellphone, and that is a dramatic increase from 5 years before.
    About 80 percent of Americans have a smartphone. And that 
actually breaks down the total population. Then every subgroup 
of the population, ethnically, racially, is similar to that 
overall standard.
    We also have 13 million Americans who don't have a bank 
account or are considered in the realm of unbanked. We have 
urban areas that are left unbanked. We have rural areas left 
unbanked. We still have work to do.
    But this technology shift is something I am really 
interested in. How do you acknowledge that, and how do we 
change CRA to actually meet something that was not contemplated 
at the time?
    And the reach can be so much better if those regulations--
the impact can be so much greater if we update these 
regulations appropriately. And that is what I really want to 
get to.
    So how do you acknowledge the use, really of--that branch 
banking isn't what it used to be 15 years ago because of 
technology? And how do we update and acknowledge that impact?
    Mr. Roberts, can you touch on that?
    Mr. Roberts. Yes. Thank you, Mr. McHenry.
    There are two things that could be done. One is to take 
into account mobile access much better under the CRA's service 
test, which today focuses primarily on branch location, which 
continues to be important but needs to be supplemented by a 
greater consideration of mobile access.
    And the second is to deal better with banks that really are 
branchless today. You can have an internet bank that could be 
headquartered in Salt Lake City or Wilmington. Its only 
obligation under CRA is to Salt Lake City or Wilmington, even 
though it is taking deposits nationally and it is providing 
loans and other services nationally. And so that is just 
outdated. These are not corner community banks in Salt Lake 
City. These are really nationwide institutions, and they need 
to be considered that way.
    Mr. McHenry. Mr. Odom?
    Mr. Odom. There is no getting around the impact that 
technology has had on the financial services sector and many 
other sectors of the economy.
    They often, though, create a false promise of being able to 
radically transform the environment. Cell phones, in order for 
them to work as a payment device, have to have certain 
applications, have to be backed up by credit cards, have to be 
backed up by bank accounts.
    Within my neighborhood, where the National Urban League is 
headquartered, we don't have any vendors who take Apple Pay, 
for instance. Also--and I am sure Mr. Mitchell could verify 
this--a lot of the small business relationships will probably 
always require some amount of face-to-face interaction between 
the borrower and the lender.
    So, while I am very encouraged by the rise of Fintech, 
there are always going to be matters that have to be cared for, 
especially in communities of color. Even where technology 
adoption is at a high level, there are still some aspects of it 
that are going to require face-to-face kinds of interactions.
    Mr. McHenry. Right. But also, technology is imperfect, too. 
Because if you can't afford a cell phone bill, you are cut off 
from job interviews, access to transit, in many cases, and 
financial services.
    So I am not saying it is a pure solution, but it should be 
acknowledged in some way and incorporated in sort of a 
regulatory environment.
    Mr. Odom. Absolutely. Minorities are overindexed for 
smartphones and for cell phones. That is not usually the 
problem. It is usually filling out a very detailed application 
on a 5-inch screen.
    Mr. McHenry. Right.
    Mr. Odom. Sometimes presents--
    Mr. McHenry. And that is an overall financial services 
problem--
    Mr. Odom. You are correct.
    Mr. McHenry. --and regulatory problem as well, not solved 
by this hearing.
    But thank you all for your testimony. I am sorry it has 
gone so long.
    Thank you. I yield back.
    Chairman Meeks. The gentlemen's time has expired.
    I now recognize the gentleman from Georgia, Mr. Scott, for 
5 minutes.
    Mr. Scott. Thank you very much, Mr. Chairman.
    This is indeed an extraordinary group of individuals that 
we have before us. I mean, your presentations have been very 
eye opening.
    And I certainly want to say hello to Ms. Baradaran.
    Did I get that right?
    Ms. Baradaran. ``Baradaran,'' yes, close.
    Mr. Scott. ``Baradaran.''
    Ms. Baradaran. Yes. Go Dogs.
    Mr. Scott. Go Dogs. And you have the red and black on.
    Ms. Baradaran. Yes, you noticed.
    Mr. Scott. I love Georgia. Welcome. Welcome to the 
committee, ma'am.
    Ms. Baradaran. Thank you.
    Mr. Scott. Now, about 100--I think 108 years ago, one of 
the greatest writers, literary geniuses, and educators, W.E.B. 
Du Bois, made this statement. He said, ``Race is and will be 
the central issue and problem facing our great nation in the 
20th Century.'' We are now in the 21st Century, and his 
proclamation rings even truer today, and nowhere does it ring 
truer than within the racial discrimination in housing, for a 
home.
    And you all have stated some very brilliant things. But I 
want to, first of all, because I am cochairman of the 
bipartisan Caucus on FinTech, and this is a big issue, and I 
want to get some exchange from you all about how we can better 
address that.
    Now, my Republican colleague, Barry Loudermilk, and I have 
introduced the FINTECH Act. And I hope you all take a look at 
that. It basically sets guardrails.
    But we need a vehicle because, Mr. Glantz, Mr. Odom, all of 
you, raised some interesting points.
    But, Mr. Glantz, I know that you are not here--you said it 
three times; I counted it--to make policy. But we are. And you 
gave some very profound and somewhat disturbing information.
    You said, number one--and this is where our technology and 
our Fintechs come in--nonbank lenders are not even covered 
under the CRA. Now that opened my eyes to something of which I 
wasn't even dimly aware. We need to start there and deal with 
that.
    And then you said that every bank dealing with the CRA got 
top grades from the CRA. But then you said that you have 
evidence that targets high rates of racial discrimination. How 
is that? Can you explain?
    Because if we don't answer these questions, then this 
hearing is not going to be as worthwhile as it should be. If we 
have the CRA out there doing this, and then you have 98 percent 
of all the people dealing with it getting top grades, but from 
all of your devastating testimony, you are saying it is 
rampant, fulfilling W.E.B. Du Bois' projection into the 21st 
Century.
    So can you help me with that, Mr. Odom, Mr. Van Tol, Ms. 
Baradaran, each of you, please?
    Mr. Meeks. You have 48 seconds.
    Mr. Scott. I'm sorry. Maybe we can get it someplace else.
    Mr. Mitchell. If I may start, Mr. Scott, I will say this: 
Discrimination results from a lot of things. Some of it is 
conscious bias, and some of it is unconscious bias. And some of 
the unconscious bias is probably not going to wane too much. 
And that is why I mentioned that I think some of the policies 
that help to address lending discrimination or disparities in 
certain areas should address supporting those institutions like 
MDIs and CDFIs that do that lending in a vast majority of what 
we do as institutions ourselves.
    Mr. Scott. All right.
    Thank you, Mr. Chairman.
    Chairman Meeks. The gentleman's time has expired.
    The gentleman from Colorado, Mr. Tipton, is recognized for 
5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman. I appreciate you 
holding this hearing.
    And I think I hear general consensus that when we are 
looking at the CRA right now, that it is failing in some 
instances to be able to adequately supply credit and financial 
opportunities to some of the low- and middle-income 
communities.
    But it seems to me a lot of the focus is just on urban 
America. I would like to be able to expand that out a little 
bit to rural America.
    As Ranking Member McHenry noted, we have 13 million-plus 
people who are unbanked or are underbanked in the country, and 
a lot of those are probably in areas much like mine. I have a 
district that butts up against Utah, New Mexico, Arizona, 
Wyoming, and a broad swath of rural Colorado.
    And, last year, that was part of the purpose of actually 
introducing legislation, which ultimately became law, for 
mobile banking, to be able to allow customers to be able to 
open up a bank account simply by scanning their driver's 
license, to be able to start to create some of that access.
    And as we are listening to the conversation right now and 
some of the branch bank closings that we are seeing, just in my 
State, we lost 19 more bank branches than were opened in 2018.
    I thought it was interesting that the Federal Reserve Board 
report noted that mobile banking is rising over the course of 
the recent years. And the report goes on to suggest that mobile 
banking can help address some of the challenges that consumers 
face in the decline of those physical branches.
    And so, Mr. Roberts, you had addressed this just a bit in 
regards to Mr. McHenry's questions that have come up. If we are 
losing these local branches and the access to being able to go 
in, with mobile banking, can it help customers actually address 
and access some of the needed financial service products, and 
wouldn't it make sense to be able to expand CRA activity past 
those delineated assessment areas into areas where the bank's 
actual activity is taking place?
    Mr. Roberts. Yes, Mr. Tipton, that would be very helpful.
    Part of the challenge for CRA is that, for the larger banks 
that cover multiple States, urban and rural communities, they 
get very little attention in their CRA examination on their 
work in rural areas.
    In some ways, that is understandable, because if you are an 
examiner and you have a lot of territory to cover for a bank, 
you want to focus on the places that are generating the most 
deposits. But those are always the largest metropolitan areas, 
and then you never really look at what is going on in the rural 
communities.
    So we think there should be changes to consolidate the 
examination of rural areas within a State, so they will have 
more market presence within that examination process, and to 
make sure that the substance of the activity, and not just the 
top line numbers, are really considered so that banks can get 
recognized for doing the important but oftentimes very 
difficult work in rural communities.
    Mr. Tipton. And I appreciate that. Because as I listen to 
the conversation--and you are exactly right: the focus is on 
concentrations of population and resources.
    And one of the frustrations that many of us who come out of 
rural America have is that the loss of 10 jobs could 
extrapolate into the loss of several thousand jobs, as an 
example, into those urban areas. And we don't want those people 
to be forgotten. They have families as well that they want to 
be able to provide for and to make sure that we are actually 
incentivizing our banks to be able to do what, I can tell you 
that our community banks in my district want to be able to do, 
and that is to be able to reinvest in those communities, to be 
able to help them grow, and to be able to create those 
opportunities for families to be able to stay in the areas that 
they live and they love.
    And this question--Mr. Roberts, maybe you can start, and we 
can just go down the line with our panel here.
    In terms of CRA examination results, being able to get 
those in a timelier fashion, rather than a few years later--you 
don't know exactly what you are doing--and to be able to give 
clarity, which has been brought up by the panel as well, what 
actually qualifies for CRA, would those be useful things to 
make sure that we are incorporating?
    Mr. Roberts. Absolutely. If you look at the biggest 6 
banks, the most recent examination for any one of them covers 
2013. I think for 3 others of the 6, it is 2012, and for 2 
others, it is 2011. So, if you are not getting feedback, either 
as a bank or as a community about performance, it becomes as 
meaningless as an X-ray that you don't receive for 2 or 3 
years.
    Chairman Meeks. The gentleman's time has expired.
    Mr. Tipton. Thank you, Mr. Chairman.
    I yield back.
    Chairman Meeks. The gentleman from Missouri, Mr. Clay, the 
Chair of our Subcommittee on Housing, Community Development, 
and Insurance, is recognized for 5 minutes.
    Mr. Clay. Thank you, Mr. Chairman.
    And, Chairman Meeks, let me thank you for holding this 
hearing and shining a light on predatory practices of redlining 
of mortgages and small business loans. And I look forward to 
working with you in that area to eradicate it, to eliminate it 
in our economy.
    So let me try this. Ms. Baradaran, in an article published 
in The Washington Post, you wrote about the need for more 
government intervention, not less, in order to address the 
racial wealth gap.
    In communities like mine, in St. Louis, which have suffered 
from historical discrimination in housing, banking, and 
healthcare, we have seen a regression as many people are still 
trying to recover from the financial crisis of 2008.
    In your testimony, you suggest that the CRA test should 
resemble the stress test that the Federal Reserve administers, 
focusing on outcomes and not just actions taken.
    Could you discuss that a little and tell us, should we 
incentivize lending in say opportunity bank zones, or should we 
prohibit all of that discrimination in the area based on ZIP 
Codes? I would just like to hear your thoughts on that.
    Ms. Baradaran. Thank you.
    So one of the things that happened before the crisis is we 
had a bunch of regulatory box-checking for safety and 
soundness. So CAMELS and all of this stuff was basically, you 
know, do you pass? Do you not? And what happened during the 
crisis is those things did not catch the outcomes: Is this 
banking sector safe or not?
    And so the stress test in the Federal Reserve said: Let's 
look at outcomes, let's look at the totality of what the bank 
is doing, and see, do you have enough capital or not? So, if we 
are looking for the CRA to fix the racial wealth gap--which we 
should be, because the Federal Government created it in the 
first place through those redline maps--then we should look at 
the outcomes: Are you infusing capital and wealth into these 
communities, or are you not? Not, ``did you do this or did you 
do that,'' because those things are not outcome-tested.
    Mr. Clay. So it is just checking a box really, the CRA 
examinations now?
    Ms. Baradaran. It sometimes amounts to that. And as the 
other panelists said, it is really easy to find loopholes. And 
if banks are not incentivized--these are low-profit loans, a 
lot of times. And so banks are going to be incentivized to find 
those high-profit areas or somehow find a loophole in that. And 
so outcome-oriented tests, like the stress test, block those 
loopholes, and they look at what is the result.
    Mr. Clay. And if we are going to online lending, then 
wouldn't a good indicator be where you place these loans by ZIP 
Code?
    Ms. Baradaran. Yes. And let me say something about Fintech, 
because we keep bringing that up. Every Fintech company uses a 
bank partnership to access that payment system. Fintech is not 
this nonbank product. They link up with a few banks around the 
country that use loopholes to get into that payment system.
    And if you want to use Venmo or Square as a consumer, you 
need a bank account. So, one in four Americans is unbanked, and 
those people needed brick-and-mortar services to put their 
cash, to pay their bills, and they are spending 10 percent of 
their income just to use their money.
    Mr. Clay. Thank you for that.
    And, Mr. Van Tol, being that redlining and other forms of 
discrimination primarily impact low- to moderate-income and 
racial and ethnic minority populations, what steps should 
policymakers consider in strengthening the CRA?
    Mr. Van Tol. Well, among other things, they can strengthen 
the fair lending reviews that are conducted as part of the CRA 
exam. That is really the way that race comes into CRA. 
Unfortunately, the OCC has weakened those reviews, resulting in 
fewer CRA downgrades for racial discrimination. That is one 
significant way it could be strengthened.
    There are other ways. The American Housing and Economic 
Mobility Act, which was introduced as S. 787 and H.R. 1737, 
would modernize CRA, apply it to more loans, to more lenders.
    We are supportive of designating areas that are receiving 
relatively low loans per capita as underserved areas and 
providing CRA credit for that. That would result in more urban 
areas and more rural areas that are receiving very little in 
the way of lending, more scrutiny under CRA, and would go a 
long way to addressing redlining and historic disinvestment in 
those communities.
    Mr. Clay. Thank you all for your responses.
    I yield back.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentleman from Texas, Mr. Williams, for 
5 minutes.
    Mr. Williams. Thank you, Mr. Chairman, for calling this 
hearing today.
    The business of banking has changed drastically since the 
Community Reinvestment Act was signed into law in 1977. One 
area in particular that I think is outdated is the geographic 
assessment area. Many people now are turning to online banking 
and other methods that make physical branches less relevant 
than they were back in the 1970s.
    So my question, Mr. Odom, to you, is, how would you 
modernize the assessment areas to ensure that most people are 
being helped under this law?
    Mr. Odom. Well, this is a subject that is being taken up in 
the advanced notice of proposed rulemaking. And I think some of 
the parties who have submitted comments on that point are here 
today.
    It is not certain to me that the rise of--that the 
geographic assessment area is fundamentally flawed. I 
understand the rise of Fintech, as we have heard today, is 
something of which to take notice. But all of those 
relationships are going through established banks that have 
geographic presence in certain parts of the country.
    So I am very eager to hear what the regulators do in the 
rulemaking with respect to the definition of how they assess 
geographic areas, but I am not sure that is the home run to fix 
the CRA.
    Mr. Williams. Okay. I have heard that the number of 
qualified investments for CRA credit is too narrow. In many 
cases, banks are cautious to loan money to projects that are 
innovative out of fear that they will not ultimately count 
towards CRA requirements.
    So, Mr. Van Tol, how would you recommend amending the 
definition of qualified investment to allow for innovation and 
a greater number of activities to be eligible as CRA 
investments?
    Mr. Van Tol. Well, let me just make a distinction. I think 
when I was in school, if half of the class failed at an exam, 
we said: Well, we weren't quite clear on what we needed to do 
to pass.
    But in this case, 98 percent of banks pass. They are 
actually doing a good job of passing the exam. It is not the 
case that they don't know in the aggregate how to pass the 
exam. They do it all the time. Most of them pass, the vast 
majority of them.
    What they don't always know is, am I going to get credit 
for this investment at this time? They do need clarity to know, 
in real time, whether or not an investment strategy that they 
are undertaking qualifies for CRA credit.
    I think, in many cases, it is a matter of guidance. It is a 
matter of providing feedback. It is a matter of training 
examiners and making sure that there is consistency, not 
necessarily a matter of changing the definition or qualifying 
more activities.
    Again, banks already qualify a great number of activities. 
They are passing their exams with flying colors.
    Mr. Williams. Thank you.
    Mr. Roberts, in your testimony, you listed a bunch of ways 
that the CRA can be improved upon, one of which is getting the 
performance metrics right for CRA performance.
    So how do you think banks should be rated for their 
performance with CRA activity?
    Mr. Roberts. What we could use is more clarity and 
transparency for how those metrics are applied. Some have 
commented on the idea of a simple ratio of dollar volume of 
lending activity relative to a bank's size. We are concerned 
that that could generate some unintended consequences.
    For example, rural areas in smaller metros often have more 
affordable home prices, but that also means that the mortgage 
amounts are smaller there. It is already hard to make money on 
small balance mortgages. But if the metric is just getting to a 
dollar target, then banks will be incented to really focus on 
higher-cost markets where they could make a loan to a high-
income borrower in a low-income neighborhood for, say, 
$750,000, rather than 10 loans for $75,000 in a low-income 
rural area.
    So we just have to get the metrics right. But I think, with 
better clarity, both about how things are measured and how they 
are then added up within the exam, we can make some progress.
    Mr. Williams. Okay. I believe I am done with my 
questioning, and I yield my time back.
    Chairman Meeks. I now recognize Mr. Luetkemeyer for 5 
minutes.
    Mr. Luetkemeyer. Thank you.
    I have one quick question for Mr. Van Tol. You made the 
comment a while ago that you didn't believe there was an extra 
cost to putting any rules and regulations on lenders, on 
nonbank lenders. Did you intend to say that?
    Mr. Van Tol. No, I don't believe I said that.
    Mr. Luetkemeyer. You don't think there would be any extra 
cost to putting some rules and regulations on nonbank lenders?
    Mr. Van Tol. No, that is not what I said.
    Mr. Luetkemeyer. Okay. I misunderstood. What did you say 
then?
    Mr. Van Tol. Well, I think that applying CRA to those 
companies would impose a cost. I think that it actually might 
lower the cost--
    Mr. Luetkemeyer. Okay. My follow-up question then would be, 
do you think that would restrict services and products to 
people as a result of that?
    Mr. Van Tol. No, I think the evidence of CRA is that it has 
expanded services and loans to--
    Mr. Luetkemeyer. You just contradicted yourself there, sir.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentleman from Illinois, Mr. Foster, 
for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman.
    And thank you to our witnesses.
    And I guess I would like to start by thanking Ms. Baradaran 
for your shout-out to Senator Bill Proxmire. I grew up being 
driven around in a rusty Studebaker with one of these 
triangular Masonite signs with Bill Proxmire's name on it. My 
mom actually ran the finance operation for Bill Proxmire's 
reelection campaign. And the entire finance operation for a 
Senate reelection campaign back then was one part-time faculty 
housewife.
    And so that tells you why you had Senators for enough time 
to think deeply about the problems that our country faces. I 
think the encroaching of Fintech and the implications for 
community reinvestment are just a perfect example of that.
    Now, when you look at this, it is clear that we are going 
to need some new metrics for reinvestment, what is meant by 
reinvestment when you look at these Fintechs that collect money 
nationwide.
    And there seems to be two different goals there. One of 
them, socioeconomic and racial equality, is one of the things 
we are trying to incentivize. The other one is to balance the 
outcomes for different communities, particularly rural and 
urban. And I would like to ask first about that one.
    We were talking about Colorado recently. And in Colorado, 
we know what the solution is there. The silver mine runs out of 
silver, and you get a ghost town, and everyone moves to Denver, 
and they are doing okay. So should the Community Reinvestment 
Act have prevented that or not?
    What do we do when the coal runs out or stops being mined 
in communities?
    Do we have a responsibility to communities to keep them 
alive when there is no longer an economic reason for them to 
exist? And to what extent should we lean against that natural 
operation of the free market?
    Does anyone want to take a shot at that?
    Mr. Odom. There have actually been some banking 
institutions in the face of these headwinds--technological 
changes, changes in the economy--have actually doubled down on 
bank branch activity. There have been some--probably have seen 
some commercials with Capital One actually creating bank 
branches that do more than just take deposits, take 
applications, and do other sorts of things.
    I think the appropriate balance is not to assume that the 
secular trends that we are seeing in rural areas or urban areas 
with respect to bank branches being gone or lending activity 
being gone is a permanent one. I think there are good actors 
out there who are trying to figure out what the right mix is.
    Mr. Foster. Yes. But how hard should we try to convince 
them to continue reinvesting in this ghost town that is 
developing?
    Mr. Van Tol. Well, the beauty of the CRA, as currently 
constructed, is that it is responsive to local needs, the 
performance context in the community. So, if the economy is 
bad, you would expect CRA to motivate institutions to invest in 
economic development. And certainly not in every area can the 
banks dramatically transform the town, but you do see those 
kind of investments.
    And that is a structure that we are very concerned, that 
the OCC has proposed looking at the definition of community and 
defining it more broadly. We urge that the definition--
intention of CRA, being responsive to local community needs, 
really measuring what is going on in the community, measuring 
how well a bank is responding to those needs.
    Certainly, not one bank can save a town like you described. 
But it can recognize that the need there is very different from 
a place that has a thriving economy, with lots of people moving 
to it. There you would be concerned about displacement, 
gentrification, maybe the economy being too hot.
    Mr. Foster. Right. Along those lines, the second goal is 
socioeconomic and racial equality. And so, for example, you 
might want to adopt policies that if someone was--their 
neighborhood was undergoing gentrification, you might do 
something to make them stand up and survive the gentrification 
better than they otherwise would have or provide opportunities, 
low-cost rental, things that would not necessarily be provided 
by the free market.
    Has anyone ever tried to just write down a metric that 
might incentivize the broad range of all of these different 
goals that we have? Maybe thinking about opening up a sandbox 
for the Fintech to play in, let them take the money that they 
are collecting nationwide and try to gain a certain role and 
see if that forces them to put money where it is actually 
accomplishing our goals.
    Has anyone tried to make a general purpose metric that 
might steer the money where we are all trying to find a way to 
make it go?
    Ms. Baradaran. Let me go back to Senator Proxmire. What 
Senator Proxmire understood here is that in some of these 
communities, the investments are not going to be the highest 
profits. But that is okay because banks have public duties. Not 
all rural communities are created equal. Some of the people 
have left. But there are still lots of communities where people 
are not leaving.
    Banks are easy, global. Money moves faster than people can 
leave their hometowns. And so, in these communities where 
people still exist, they are going to school, they are thriving 
in these communities, but their banks are gone. And so those 
are the communities that we are focused on. And some of them 
are not going to be highest profits, but banks still have 
public duties, even though there aren't high profits.
    Mr. Mitchell. If I can just add to that, you have a CDFI 
fund that produces a positive return on investment for the 
taxpayers, and it is woefully underfunded. And every year 
during the budget process, it seems to be on the chopping 
blocks for elimination when it should be increased.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentleman from Georgia, Mr. Loudermilk, 
for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    And I appreciate the opportunity to have this hearing 
today.
    Something that is very important, from my knowledge of the 
Community Reinvestment Act, is that it served a great purpose 
in this nation. And we are, in fact, a better nation because of 
changes in our society, changes in business models and such.
    And I commend the OCC for looking at bringing the CRA up to 
date. When you look at the changes in society, you look at the 
changes predominantly in technology. It is technology with 
Fintech. These are bringing banking services to areas that were 
traditionally unbanked or underbanked. And it is important, as 
my colleagues said, to have sandboxes, the ability to get into 
these areas and see how these new technologies can actually 
enhance the original purpose of the CRA.
    And so I believe and I think giving the OCC the ability to 
make reforms collectively with all three of the banking 
agencies to make sure that the CRA is meeting its original 
purpose and doing it effectively and with the new technologies 
is very important.
    But one of the problems that I have particularly seen and 
heard, especially with our community bankers in Georgia, is 
inconsistency with a lot of the CRA exams. For instance, some 
of the services, loans and investments, may receive CRA credit 
at one bank but not another.
    One example that was given earlier is, does partnering with 
a nonprofit qualify for a CRA credit? That could be interpreted 
in different areas by different examiners.
    So, Mr. Mitchell, do you have any recommendations about how 
we can address the inconsistencies in these exams?
    Mr. Mitchell. First of all, training. I think also having a 
database that shows which projects qualify. Individual banks 
from time to time, as has come up several times this morning, 
are not sure whether a particular project that they invest in 
or may invest in or lend to would qualify. And I think if there 
is a database that answers these questions, then the bankers 
can go online and see that someone else has invested or lent to 
a particular project that did qualify. So the clarity and 
training among examiners is critical.
    Mr. Loudermilk. Mr. Roberts, I saw your head nodding. Do 
you have something you would like to add to that?
    Mr. Roberts. I agree. But I would also suggest that the 
banking agencies should have specialized examiners for CRA. The 
same examiner who is doing anti-money laundering exams and 
other kinds of compliance exams, or safety and soundness exams, 
simply isn't going to know enough about not just CRA but also 
how banks are really responding to local community needs. To 
understand that is just a very important factor and would go a 
long way toward consistency.
    Mr. Loudermilk. Mr. Roberts, while I have you, going from 
inconsistencies and how we can address those, I want to go to 
the extensive time that it takes to actually receive exam 
results. To me, it seems like the longer banks are waiting for 
their exam results to come back, the less confidence they have 
that they are meeting the goals and, therefore, delay serving 
certain communities and demographics that they would really 
like to be able to target for CRA and for the credit.
    And as we have seen and has been testified to, the CRA 
compliance is generally strong and banks are generally 
interested in fulfilling these needs.
    Do you think that these delays cause significant problems 
in banks meeting these needs, and how can we address it?
    Mr. Roberts. Tremendous problems. Banks are really flying 
blind. They don't know whether the examiners and agencies think 
they are doing a good job or not. They can't see the areas that 
might be identified for improvement. They can't see the areas 
where they are excelling and can double down and do even more 
in that area.
    And communities can't see what the banks are doing and how 
well they are doing so that they can engage more constructively 
with the banks.
    Mr. Loudermilk. What can we do to fix this? Is that part of 
some of the modernization that we need to look at in reforms?
    Mr. Roberts. Yes. We recommend that performance evaluations 
be published within 12 months of the close of an examination 
period.
    So, if you have a 3-year examination period that ended at 
the end of 2018, you should have your CRA rating by the end of 
2019.
    Mr. Loudermilk. Thank you. I yield back.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentlelady from Michigan, Ms. Tlaib, 
for 5 minutes.
    Ms. Tlaib. Thank you, Mr. Chairman.
    Thank you all so much for being here and for your 
incredible work.
    I want to share a story. I used to walk down my block for 
over 30 years. But even down my block, where I knew every 
single homeowner--it was a predominantly beautifully diverse 
block. Some were even born in their home, right? Some were able 
to keep their home for 70 years, through 3 generations.
    And growing up kind of in the 1980s and 1990s in the City 
of Detroit, I mean leading the Nation, like 70 percent, in some 
neighborhoods, of home ownership, was pretty incredible. It 
stabilized not only our school system, but our environment. 
Even economically, we saw more and more neighbors being able to 
stabilize themselves and be able to provide an incredible 
future for their children.
    And the percentage of African Americans who owned their 
homes dropped in Michigan more than any other State, down to 40 
percent, from just over half in 2000. The decrease has been 
greatest for middle-aged Black Americans in Michigan, between 
ages 45 and 64. I think it was 60 percent in 2000 to down to 41 
percent in 2016.
    Much of that decline was in the City of Detroit. We flipped 
from a majority home ownership to now 54 percent of my 
residents are renters.
    I essentially have been listening to this hearing, and 
really understanding what the purpose of CRA was, which was, 
you know currently now understanding there are loopholes, and 
it needs to be updated. It is based on geography. And banking 
institutions are skimming the larger, more profitable low- and 
moderate-income communities and lending to higher-income 
borrowers. That is the data I have been reading. So the loans 
meet the CRA requirements and regulations.
    Mr. Mitchell, let's say you are in a low/moderate-income 
neighborhood, like the one where I grew up in, the one where I 
am raising my boys in, where the borrower is making 125 percent 
of the AMI and a borrower making 75 percent of the AMI, in your 
opinion, which borrower would the banking institution most 
likely lend to?
    Mr. Mitchell. Well, that depends. We have a history, as an 
MDI and a CDFI, of getting behind the numbers and looking at 
the story. It is an integral part of how we do business.
    And this is why you should have concerns about nonbank 
lenders because they don't have the ability to do that. Their 
algorithms don't do that.
    So we look at the story. And we look at what you are 
telling me, and we back it up with our own due diligence and 
research. And it depends because we can lend to either one.
    Ms. Tlaib. Yes, but under the CRA, though, the banking 
institution would still receive the same CRA credit for lending 
to a higher-income borrower in an LMI neighborhood as they 
would a low-income borrower, correct?
    Mr. Mitchell. Yes. We would do both in that case.
    Ms. Tlaib. And my concern is, where there is little 
incentive to lend to LMI communities, the CRA is of little 
benefit to my constituents at this time because banks will not 
issue mortgages for less than $50,000, forcing them to borrow 
from nonbanking institutions such as Quicken Loans, as the 
chairwoman mentioned, which is a leading mortgage loan creator 
in my district, which leads me to the next question. And this 
one is for Mr. Odom.
    Mr. Odom, would you say that because nonbanking 
institutions are obligated to follow CRA, that borrowers are 
more subject to payday lending and discrimination and redlining 
because of this loophole?
    Mr. Odom. I believe that certainly plays a role, 
Congresswoman. We have seen the rise of nonbank institutions, 
particularly in the Census tracts associated most closely with 
African American and minority owners. They filled a void; they 
filled a vacuum that has been created by a lack of lending by a 
lot of CRA-covered institutions.
    We have talked a lot about nonbanks and banks today. And I 
think the message that I would like to send to you is, whatever 
regulatory structure we land on, it should be a leveling up of 
our regulations, not a leveling down.
    A lot of the organizations, a lot of nonbank organizations, 
rightly are young. They are new. They have not grown up in a 
regulatory environment. But we have to resist the impulse to 
say, well, because we have new entrants who are taking market 
shares, the incumbents should follow their lack of regulation.
    That is what we are seeing here. We have not figured out 
what this regulation is going to look like, but we should be 
going to the highest measure, not the lowest common 
denominator.
    Ms. Tlaib. Thank you. And, Mr. Chairman, if I may--
    Chairman Meeks. The gentlelady's time has expired.
    Ms. Tlaib. If I may, I just wanted to submit an article 
entitled, ``Loophole in law for the poor spurs 
gentrification,'' into the record.
    Chairman Meeks. Without objection, it is so ordered.
    The gentlemen from Tennessee, Mr. Kustoff, is recognized 
for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman.
    And thank you for calling this important hearing this 
morning.
    I do want to thank all of the witnesses for testifying this 
morning.
    Mr. Roberts, if I could, my district is west Tennessee, so 
I have the suburbs of Memphis and then west Tennessee and some 
rural parts of west Tennessee.
    Recently, I had the opportunity to speak to a roundtable of 
bankers from all around my district. And one of the topics was 
CRA modernization. One bank in my district told me that they 
were recently required to open up a branch for CRA purposes and 
that, because of that, it is losing about $100,000 a year 
annually.
    As we look at the CRA and the way it is constructed and 
what is required of the different communities, it seems like 
regulators increasingly have included in their CRA examinations 
criteria, in my opinion, that may not be related to CRA, 
including compliance with other financial laws or consumer 
regulations that have their own standards and penalties for 
violations. An example for banks in my district is that the 
banks are being subjected to fair lending questions during 
their CRA exams.
    With all of that said, we have talked a lot this morning 
and you all have talked a lot about modernization. How do you 
envision modernizing CRA to best suit the needs of the 21st 
century financial institutions and the communities that they 
serve, including some of these rural communities?
    Mr. Roberts. Yes, Mr. Kustoff. Rural communities certainly 
need much better consideration under CRA. They are often 
overlooked in the CRA process because they are smaller than the 
larger cities, and so the examiners tend to focus more on them. 
But there are a number of things that could be done to remedy 
that.
    Mr. Kustoff. And what are some of those areas?
    Mr. Roberts. One thing we would suggest is that oftentimes 
rural areas need economic development. Mr. Foster had raised 
the anecdote of a town that loses its primary employer. And CRA 
should do much more to recognize economic development efforts 
in distressed communities, urban and rural.
    So it is not just a numbers game. Even a small loan or 
investment can sometimes make a big difference in a small 
community. But it gets overlooked because of its size. So those 
are some of the things we would suggest.
    Mr. Kustoff. I appreciate that.
    Lastly, if I could, financial literacy--I do think that the 
banks in my communities do a pretty good job of trying to 
educate through financial literacy. And, in fact, this week is 
Financial Literacy Week in Tennessee with our community banks.
    What I have heard from my banks is that unless financial 
literacy is done in very specific areas, it doesn't count 
towards those CRA requirements.
    Do you believe that these requirements should be or could 
be modernized, if you will, to allow for education done within 
a bank's footprint to be counted towards the CRA?
    Mr. Roberts. Yes, I think it could be done, and you can 
maintain a faithfulness to the low- and moderate-income focus 
of CRA by simply taking a look at what share of the broader 
community is low- and moderate-income and provide pro rata 
credit for those broad activities based on that so that you 
don't reject those activities entirely because they are not 
specifically targeted, but you recognize that a community that 
is, say, 40 percent low- and moderate-income is really 
benefiting in a different way from a community that is 10 
percent low- and moderate-income.
    Mr. Kustoff. Thank you. And I yield back the balance of my 
time.
    Chairman Meeks. The gentleman yields back the balance of 
his time.
    I now recognize the gentleman from Utah, Mr. McAdams, for 5 
minutes.
    Mr. McAdams. Thank you, Mr. Chairman.
    I want to thank the panelists for their testimony today. 
And I want to thank you, Mr. Chairman, for holding this 
important hearing.
    I also want to give a special shout out to Professor 
Baradaran. I have had 20 years to practice her name, as we are 
personal friends going back some time. So not only is she a BYU 
grad from my State of Utah, but she practiced law at the same 
firm I did, Davis Polk & Wardwell, in New York. So it is great 
to see you, Professor.
    Ms. Baradaran. Good to see you Ben, Mr. McAdams.
    Mr. McAdams. The CRA has been an important tool in my 
district, at both serving the credit needs and driving 
investment to many of Utah's communities, and I want to ensure 
that we don't weaken the CRA in any of our reform efforts. But 
I have also seen the shortcomings of the current CRA structure.
    As the mayor of Salt Lake County, I often teamed up with 
many of the financial institutions in Utah to pursue innovative 
investments. For example, Salt Lake County pioneered many of 
the first Pay for Success or Social Impact Bond programs in the 
nation. We expanded access to early childhood education, we 
targeted homelessness, and we reduced recidivism in our jails. 
And we couldn't have done these projects without our financial 
partners.
    What I learned while working on these projects for CRA 
credit was that it--what I learned while working on these 
projects is that the financial institutions we partnered with 
often didn't do these projects for CRA purposes. They said it 
sometimes just wasn't worth the hassle. It wasn't worth jumping 
through the hoops to prove to their regulators that the 
projects were CRA eligible. Oftentimes, they wouldn't have that 
certainty until long after they had needed to make a commitment 
for the projects, so there was a lot of uncertainty in their 
CRA boxes they had to check.
    Instead, they would rather do the same lending or 
investment activity they had done the previous decades without 
any indication that these projects were really what the 
community needed because they knew that those investments would 
be CRA eligible.
    So the system we have today kind of forced them or 
incentivized them to do the status quo and go through the 
motions of that rather than innovate and think more creatively 
about how they can reach into the populations we are trying to 
help.
    When considering CRA reform, I want to preserve both the 
spirit and intent of the CRA to benefit low- and middle-income 
communities and individuals, but I also want to push financial 
institutions to innovate, to push beyond their comfort levels, 
and to try new data-driven projects without the fear that they 
would be punished by their regulators for taking a chance on 
their communities.
    Professor Baradaran, I think there was a great discussion 
about--and I appreciated in your comments about the focus on 
outcomes rather than simply checking the box. So as a local 
mayor, I saw that as well, that we just encouraged and rewarded 
checking the box rather than focus on outcomes, and shifting to 
that focus on outcomes.
    So first, just an editorial comment. I would like to see 
local input on what some of those outcomes might be, but then 
once outcomes are identified as we are looking at what 
strategies might be deployed in our communities to extend 
opportunities to those populations that we are targeting, what 
can we do to create some certainty, maybe approval of a CRA-
eligible activity earlier in the process to know that these 
strategies would be--what I would like to see CRA accomplish is 
to encourage innovation and forward thinking rather than risk-
averse activities in the CRA to encourage that type of 
innovation and risk taking.
    And to some extent, I worry about--I think the shift to 
outcomes is important, but I worry that doing that introduces 
even more uncertainty into the process and discourages 
financial institutions from innovating and pushing the limits. 
So maybe, Professor Baradaran, and than any others who want to 
comment on that?
    Ms. Baradaran. Yes. Utah is actually a perfect example. And 
the problem that you as mayor looked at is homelessness, right? 
So you have this huge problem and then the solution that you 
had, but you needed bank funding. And Utah happens to be the 
home of many of these Fintech banks whose assessment area is 
really undefined because they are basically partnering with 
these global Fintech networks.
    And so here you have a problem and then you have these CRA 
duties, and there should be a way to match those. This is where 
aligning incentives needs to be done at the regulatory level--
banks should definitely get CRA credit for partnering with 
public institutions and mayors and other places who have sort 
of shovel-ready projects ready to go.
    And so, yes, there is some uncertainty with outcomes, but I 
think it is--you know, when students come to me and say, tell 
me exactly what to do to pass this test, I would rather say, 
look, know the materials and you will get a good grade. I think 
that is what I would say to banks is, do your duties and you 
will pass the CRA. Don't look for the least you can do just to 
check that box.
    Mr. Van Tol. And CRA gives credit for innovation. Part of 
the problem is innovation as defined is really something that 
has never been done before rather than something that is really 
responsive in an innovative--and to a local need. And so we are 
supportive of specialized CRA examiners of more training for 
examiners, of more guidance, of more certainty in realtime as 
to whether or not an investment is going to qualify or not.
    To your point, they will do the investment and then argue 
later that it will qualify. Many of them do qualify and are 
successful in doing that. It is the hassle and the not knowing 
whether or not they are going to get credit that creates--
    Chairman Meeks. The gentleman's time has expired.
    Mr. McAdams. Thank you.
    Chairman Meeks. I now recognize the gentleman from 
Virginia, Mr. Riggleman, for 5 minutes.
    Mr. Riggleman. Thank you, Mr. Chairman.
    Thank you all for being here. I know it has been a long 
morning going into afternoon, so thank you very much for being 
here.
    I want to start out by reading directly from the Federal 
Financial Institutions Examination Council's website on the 
purpose of the Community Reinvestment Act. I am actually doing 
this for a reason, believe it or not.
    So the CRA, ``is intended to encourage depository 
institutions to help meet their credit needs of the communities 
in which they operate, including low- and moderate-income 
neighborhoods, consistent with safe and sound banking 
operations.''
    And I just want to--where my questions come from, my 
district in Virginia--and I know it is hard to believe, but I 
have the most rural district in Virginia that is bigger than 
the State of New Jersey and parts of Delaware. Also, when it 
looks at the disparate income in my district--and, again, I 
don't know if you guys have--I don't know if any of you have 
actually had to deal with districts like this, but in the 
northern part of my district we have a median family income of 
$91,000 per year. In the southern part of my district, near the 
North Carolina border, it is $35,000 to $37,000 per year and 
that is a $55,000 to $60,000 delta.
    The questions that I am asking are actually based on the 
fact that when this says low- and moderate-income 
neighborhoods, I have low- and moderate-income regions. I have 
one county that is massive that has 7,800 people.
    So when you see these questions I am about to ask, and I am 
going to roll through them because I know you guys have been 
busy, but I am very interested in what you think about some of 
the issues that we are facing in the parts of my district that 
I have.
    I fully support the mission of the CRA. I think a lot of 
it, when I talk to the bankers in my district, it is about the 
enforcement supervision. I had one banker in my district who 
told me a story about how an examiner was in his institution, 
and after reviewing a loan filed, the examiner okay'd it for 
CRA credit.
    And a year later another examiner came in from that same 
institution and even--listen, this banker has been serving his 
community for years, and then said that actually the file was 
wrong and it did not actually--he could not get a CRA loan for 
that exact same file.
    And that frustration in my district has been pretty 
noticeable. Not only that, again, I think is because we have a 
limited number of banks and we have such a large area. I know 
this is a yes-or-no question. And it is because I want to go to 
the next thing and we could take a while, but--and I wouldn't 
think anybody--does anyone on this panel think that this sort 
of examination on CRA, and that is where you have this sort of 
inconsistency in regulatory models, helps institutions meet the 
credit needs of their communities, yes or no?
    Mr. Roberts. No.
    Mr. Riggleman. No. Thank you. I just don't think anyone on 
this panel or otherwise could argue against a regulatory 
structure that is clear, consistent, and works for all impacted 
parties, including the lenders.
    And, again, when I go back to these questions, it really 
comes back to the simple fact that I have such a unique 
challenge in my district, even under CRA, that it just puts us 
in a really incredible position in trying to get loans for 
these disadvantaged communities that are so widespread.
    And I would think that if we had a regulatory structure 
that is clear, consistent, and does work for all impacted 
parties, including the lenders, the reason I think it is so 
important is because I want to incentivize financial 
institutions of all sizes to comply with the laws and 
regulations, right, in coming on the government to ensure equal 
and tailored treatment. So it is a little bit of a switch here 
because I think fair treatment is the rationale for the CRA.
    And I will say, Mr. Van Tol, I had a question for you. And 
it really does come down to my banks and the questions that I 
have. And by the way, there is no vitriol in this whatsoever. 
Why does NCRC oppose recommendations to relieve regulatory 
burden on small and intermediate banks under CRA by increasing 
the thresholds for these respective CRA tests?
    The question really is, is it appropriate to subject a $1.3 
billion bank to the same community development standards as a 
$100 billion institution even based on the facts I gave you 
about our district?
    Mr. Van Tol. Well, as I said earlier, those institutions in 
their immediate small banks do about $3 billion in community 
development loans and investments each year, and that is the 
size of the entire HUD CDBG budget, which is a critical source 
of community development financing in rural communities.
    So if you were to exempt those institutions, you would 
likely see $3 billion a year in community development 
investments in your district and elsewhere, especially in rural 
communities, go away. And that is why we are opposed to it. We 
think it is a significant source of community development 
financing for underserved rural communities and urban 
communities alike.
    Mr. Riggleman. Yes. And I appreciate that. And I think part 
of it too is that just based on size, it is also the 
consistency of the regulatory burden that they sort of carry. 
And I think that is the problem that I had with this is that if 
it is a one-size-fits-all with inconsistent regulatory 
structures, you really can have a lot of confusion, which 
happened when I started companies also, right. You have 
multiple--you have confusion.
    I know I have 28 seconds left. Mr. Roberts, in that 28 
seconds, can you explain why counting farm loans based on 
distribution or volume versus dollar amount is important to 
ensure equal proliferation of CRA?
    Mr. Roberts. Sure. Because those loans are small. And if 
all you are looking at is their dollar volume, those loans are 
just not going to move the needle on a CRA review.
    Mr. Riggleman. Yes. Thank you very much. I know my time is 
up, and I appreciate all of you. Thank you, sir.
    Chairman Meeks. The gentleman's time has expired. And I now 
recognize the gentleman from Washington, Mr. Heck, for 5 
minutes.
    Mr. Heck. Thank you, Mr. Chairman.
    I would like to direct a question to Mr. Van Tol, Professor 
Baradaran, and Mr. Mitchell. When the CRA was originally 
adopted, it had to do with making sure that people weren't 
being locked out of access to mortgages to buy homes in 
redlined areas.
    Obviously, we still need to be incredibly vigilant for that 
policy objective. But frankly, I worry also that the threat has 
changed and we have not adapted to it. It is also now, frankly, 
whether or not somebody can find a home to purchase.
    In the 1970s, by comparison, we were building 12,000 homes 
per million people--12,000. Today, we are building 4,000 homes 
per million people. And so there frankly aren't anywhere near 
enough homes to go around for people who aspire to 
homeownership, and that disproportionately burdens people of 
color and people of low income.
    So I am frankly wondering if there is any way in which the 
CRA can help address this in redlined areas. My personal point 
of view, developed over a long period of time, is that we 
frankly have a problem with respect to construction lending in 
particular. And I wondered if the CRA can or should be modified 
to encompass construction lending, especially for workforce 
housing.
    We have passed out of this committee a very ambitious, 
which I enthusiastically supported, ending homelessness bill. 
But we still have the issue, I believe, of market rate housing, 
especially workforce housing, enabling people to stay in the 
communities they live in and be able to actually buy a home, 
not because they can't access a mortgage but because they can't 
find the home to buy because, again, 4,000 homes per million as 
opposed to 12,000 homes per million when we passed the CRA.
    So, Mr. Van Tol, Professor, and Mr. Mitchell, is this 
something we should explore?
    Mr. Van Tol. Yes. The answer is, yes, CRA can do something 
about that. Let me start by noting that we have done a study 
which found that 75 percent of redlined areas that were 
redlined in the 1930s are still economically distressed today. 
And so that remains an issue. The affordable housing supply 
problem is a huge problem. And certainly, CRA, for example, can 
motivate construction lending. That counts on a CRA exam.
    I think the problem is, again, going back to the local 
convenience and needs of communities, there is a real mismatch 
between where the supply is. We know of many communities in the 
midwest where there are ample numbers of houses. It is just 
people can't get a loan, either because it is a very small loan 
size or the house needs too much rehab, et cetera, et cetera.
    And yet, there are places like Washington, D.C. where you 
have a very hot housing market where you have an incredible 
mismatch between the supply and the demand. We have actually 
started a bipartisan affordable homeownership council to deal 
and address with this issue because it is becoming an issue, 
especially in gentrifying areas where you have this incredible 
mismatch between the production of housing.
    Remember, the community development part of CRA does 
motivate institutions to invest in the development of 
affordable housing, including multifamily housing. And so, 
again, if you are to remove or raise the limits or exempt 
certain institutions from that requirement, you are going to 
see less production of housing, not more.
    Mr. Heck. Thank you.
    Professor Baradaran?
    Ms. Baradaran. Yes. And this is where the outcome-oriented 
goals are really important, like the stress test. So the CRA 
says it is not just about mortgages, it is about the 
convenience and needs of each community. And each community is 
different. Not all banks are the same. And so this is where you 
have to align these are the needs of the community.
    And exactly as you said, affordable housing. Cities like 
Detroit are in hyper vacancies where you can buy a house for 
$5,000, but no one is going to give you the financing, whereas 
in San Francisco, you can barely afford to get a house unless 
you are a billionaire. These are two different cities, and so 
those CRA requirements need to be matched to the convenience 
and needs of that area.
    Mr. Heck. Mr. Mitchell?
    Mr. Mitchell. To use your example of construction lending 
in, say, a CRA community, it requires that the examiners, 
again, provide some clarity. If I am going to lend to a 
construction lender who is wealthy and is going to build market 
rate housing, would that count even though it is in a low- or 
moderate-income community? I am not sure. That is something 
that the examiner would have to determine.
    If they are going to build affordable housing, then, yes, 
it would--
    Mr. Heck. If I may interrupt, sir, and I apologize, I have 
so little time left.
    But I am particularly focused on starter homes or starter 
units because that is a place where I think the market has 
failed us. And the fewer starter homes that are available, the 
more people remain in a rental. The higher the occupancy rate, 
the higher the rents go. The higher the rents go, the more 
people become rent-burdened. The more people become rent-
burdened, the more people need subsidies. That more people 
require subsidies, the more homeless there are.
    It is an ecosystem, and I am totally convinced that we have 
to look at this in the context of it being an ecosystem. And, 
again, I am interested in how the CRA might be a means of 
helping, especially starter homes, workforce housing.
    My time is up. Thank you all so very much.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentlelady from Massachusetts, Ms. 
Pressley, for 5 minutes.
    Ms. Pressley. Thank you, Mr. Chairman, for your leadership 
on this and so many other critically important issues.
    I represent Massachusetts's 7th District, one of the most 
diverse and unequal districts in the country. In fact, a recent 
report by the Federal Reserve Bank of Boston found evidence of 
a widening wealth gap among families of color compared to their 
white counterparts. Across the City of Boston, close to 80 
percent of white consumers own a home compared to less than 
one-fifth across minority communities.
    Many of my colleagues have already touched on the civil 
rights origins of the CRA and the need to strengthen the bill 
to ensure the banks and other financial institutions are doing 
right by low-income communities. I fundamentally agree. It is 
one of the reasons why I am so proud to have introduced the 
American Housing and Economic Mobility Act with Senator Warren 
and many of my colleagues, which would make housing more 
affordable and reverse decades of discriminatory policies that 
have denied Black and Brown families.
    Our bill would also strength the CRA, extending it to 
nonbank mortgage companies, promoting greater investment in the 
communities that need it most, and strengthening penalties for 
institutions that fail to follow the rules.
    Mr. Odom, as you mentioned in your testimony, homeownership 
among Black families and other communities of color continues 
to lag at historic levels. How will strengthening the CRA lead 
to increased responsible mortgage lending and expand 
sustainable economic mobility for low-income communities of 
color?
    In the Massachusetts 7th, just in a 3-mile radius, 
Cambridge to Roxbury, median household income drops by $50,000. 
So how would strengthening the CRA address that?
    Mr. Odom. Strengthening the CRA allows us to get the kind 
of data to track what is going on in the marketplace. The CRA 
is responsible for the data that we have seen presented by Mr. 
Glantz and his partner today. We would be totally in the dark 
if we didn't have the kind of CRA reporting requirements about 
where money is going and who is getting it.
    So first, I think from an informational standpoint, the CRA 
is critical in creating that type of transparency, that ability 
for lawmakers to at least see where the problems are and do 
something about it.
    Second, I would say that it is important to strengthen the 
CRA because it is critical to the maintenance of our 
communities. We talked historically in my testimony about the 
fact that so many of the people who are in that 20 percent 
homeownership that you mentioned, African-American families, 
they are actually contributing to the depository institutions. 
Small businesses are putting their money into these 
institutions. And the money, at least historically, as what 
motivated CRA, it flies elsewhere. It flies to the 80 percent 
of your district or homeownership that you mentioned.
    So it is important to keep this compact between local 
communities and local banks, because without them--in my 
testimony, we talked about the high incidence of blight, 
unemployment, and lack of opportunity that results when you 
don't have access to capital.
    And third, I will put in a plug for Black-owned businesses 
or minority businesses generally. Minority businesses tend to 
be underfunded compared to other groups, even in loans of last 
resort like SBA loans. I think the current data says that 
something like 3 percent of minority businesses have access to 
small business loans.
    By keeping a requirement in place, in law, by keeping a 
light of accountability on this, we are hoping we can keep our 
communities intact and make them attractive. And when they are 
attractive, the capital will follow hopefully.
    Ms. Pressley. All right. Very good.
    Mr. Glantz, your investigation found some troubling 
evidence of the ongoing prevalence of redlining and 
discrimination in our banking system, trends you largely 
associate with the fact that the CRA, as currently drafted, is 
race neutral.
    Now, many States have moved forward with drafting their own 
proposals to combat racial discrimination by the financial 
institutions in their States by explicitly requiring them to 
track lending data by race and ethnicity. What are your 
thoughts on this approach, and do any other panelists have an 
opinion on the matter?
    Mr. Glantz. I would note that Massachusetts is one of the 
States that has its own Community Reinvestment Act law. 
However, when we look at the lending in the Boston and 
Cambridge MSAs, we found that among the communities, Census 
Tracts where there were at least 100 home mortgage loans, there 
were 320 of them, and all but 7 of them were majority white 
neighborhoods.
    And of those 7 neighborhoods that got more than 100 
conventional home purchase loans, in 2015 and 2016 in Boston 
and Cambridge, those 7 majority people of color neighborhoods, 
the majority of the loans from financial institutions went to 
whites. And that is what we found in our investigation.
    Ms. Pressley. Thank you.
    Chairman Meeks. The gentlelady's time has expired.
    Ms. Pressley. Thank you, Mr. Chairman.
    Chairman Meeks. All time has expired.
    Without objection, I would like to submit for the record a 
statement from me in regards to the OCC; testimony from the 
Bank Policy Institute; and a statement from the Credit Union 
National Association.
    I would like to thank our witnesses. You were excellent. 
You were very informative. You have given us a lot to think 
about.
    And I would hope that the FDIC, the Fed, and the OCC have 
been listening to this hearing and will take into consideration 
all of your testimony and all of your thoughts as we drive and 
strive to have a CRA that is effective for all Americans.
    I thank my colleague, Ranking Member Luetkemeyer, and my 
Republican colleagues for indeed, as we talked a broad range, 
we talk about urban America and the need for CRA to be 
appropriately applied in rural America. I think it will help 
make us all balance the playing field so that everyone can get 
an opportunity to enjoy the American Dream and the right of 
homeownership and creating wealth.
    I will end as I started, if it wasn't for my parents having 
the opportunity to buy a home and to have that home appreciate 
in assets, I would not have had the ability to pay for my 
college education nor would my siblings.
    So this is a goal that I think that we all should have 
because the better informed as far as the opportunities are 
concerned, the better it is for all of us. And you have truly 
contributed a great deal to us by testifying this morning.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 12:25 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             April 9, 2019