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





 
                    THE COMMUNITY REINVESTMENT ACT:

                    REVIEWING WHO WINS AND WHO LOSES

                   WITH COMPTROLLER OTTING'S PROPOSAL

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

                                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

                             SECOND SESSION

                               __________

                            JANUARY 14, 2020

                               __________

       Printed for the use of the Committee on Financial Services


                           Serial No. 116-75
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]               



                           
                           ______                       


             U.S. GOVERNMENT PUBLISHING OFFICE 
42745 PDF             WASHINGTON : 2021                           

                 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             ANN WAGNER, Missouri
GREGORY W. MEEKS, New York           PETER T. KING, New York
WM. LACY CLAY, Missouri              FRANK D. LUCAS, Oklahoma
DAVID SCOTT, Georgia                 BILL POSEY, Florida
AL GREEN, Texas                      BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri            BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
BILL FOSTER, Illinois                SCOTT TIPTON, Colorado
JOYCE BEATTY, Ohio                   ROGER WILLIAMS, Texas
DENNY HECK, Washington               FRENCH HILL, Arkansas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
RASHIDA TLAIB, Michigan              TED BUDD, North Carolina
KATIE PORTER, California             DAVID KUSTOFF, Tennessee
CINDY AXNE, Iowa                     TREY HOLLINGSWORTH, Indiana
SEAN CASTEN, Illinois                ANTHONY GONZALEZ, Ohio
AYANNA PRESSLEY, Massachusetts       JOHN ROSE, Tennessee
BEN McADAMS, Utah                    BRYAN STEIL, Wisconsin
ALEXANDRIA OCASIO-CORTEZ, New York   LANCE GOODEN, Texas
JENNIFER WEXTON, Virginia            DENVER RIGGLEMAN, Virginia
STEPHEN F. LYNCH, Massachusetts      WILLIAM TIMMONS, South Carolina
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

NYDIA M. VELAZQUEZ, New York         BLAINE LUETKEMEYER, Missouri, 
DAVID SCOTT, Georgia                     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:
    January 14, 2020.............................................     1
Appendix:
    January 14, 2020.............................................    45

                               WITNESSES
                       Tuesday, January 14, 2020

Bautista, Faith, President and CEO, National Diversity Coalition 
  (NDC)..........................................................    13
Gonzalez-Brito, Paulina, Executive Director, California 
  Reinvestment Coalition (CRC)...................................     8
Knight, Hope, President and CEO, Greater Jamaica Development 
  Corporation (GJDC).............................................    12
Levi, Gerron S., Director, Policy and Government Affairs, 
  National Community Reinvestment Coalition (NCRC)...............     6
Rodriguez, Eric, Senior Vice President, Policy and Advocacy, 
  UnidosUS.......................................................    10

                                APPENDIX

Prepared statements:
    Bautista, Faith..............................................    45
    Gonzalez-Brito, Paulina......................................    52
    Knight, Hope.................................................   179
    Levi, Gerron S...............................................   183
    Rodriguez, Eric..............................................   215


                    THE COMMUNITY REINVESTMENT ACT:

                    REVIEWING WHO WINS AND WHO LOSES

                   WITH COMPTROLLER OTTING'S PROPOSAL

                              ----------                              


                       Tuesday, January 14, 2020

             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 2:39 p.m., in 
room 2128, Rayburn House Office Building, Hon. Gregory W. Meeks 
[chairman of the subcommittee] presiding.
    Members present: Representatives Meeks, Velazquez, Scott, 
Heck, Foster, Lawson, Tlaib, Porter, Pressley, Ocasio-Cortez, 
Wexton; Luetkemeyer, Lucas, Posey, Barr, Tipton, Williams, 
Loudermilk, Budd, and Riggleman.
    Ex officio present: Representative McHenry.
    Also present: Representative Garcia of Illinois.
    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 the 
subcommittee are authorized to participate in today's hearing.
    Today's hearing is entitled, ``The Community Reinvestment 
Act: Reviewing Who Wins and Who Loses with Comptroller Otting's 
Proposal.''
    I am now going to recognize myself for 4 minutes to give an 
opening statement.
    To my colleague, Ranking Member Luetkemeyer, and the 
members of the subcommittee, welcome to this hearing on 
modernizing the Community Reinvestment Act (CRA). This hearing 
is our second on the subject during this Congress, following 
one we held on April 9, 2019.
    The Community Reinvestment Act was enacted into law in 1977 
as a direct response to the long, painful legacy of structural 
discrimination, financial exclusion, redlining, and economic 
suppression of racial minorities in America. At its core, the 
CRA is a civil rights bill. It was the fourth of a series of 
banking bills passed to address systemic discrimination in 
banking, including the Fair Housing Act of 1968, the Equal 
Credit Opportunity Act of 1974, and the Home Mortgage 
Disclosure Act of 1975. These bills built on the findings of 
the 1961 report from the U.S. Commission on Civil Rights, and 
community-led civil action in Chicago to hold banks accountable 
for rampant discrimination in lending.
    Any reforms or modernization must remain true to this 
legacy. Broadly speaking, there is an agreement that CRA needs 
to be modernized, that it needs updating in the age of online 
banking and fintech, that all stakeholders can benefit from 
greater transparency and predictability in CRA oversight 
examination, and that there are important opportunities to 
build on the experience from the past 25 years since CRA was 
updated.
    I was greatly disappointed to learn that Comptroller Otting 
from the Office of the Comptroller of the Currency (OCC) pulled 
the plug on the interagency working group to modernize CRA and 
insisted on plowing ahead with an approach that was widely 
panned in comments to the Advance Notice of Proposed Rulemaking 
(ANPR). Indeed, the core framework put forward by the OCC using 
a simple ratio has been thoroughly picked apart as inconsistent 
with the original civil rights intent of the CRA, breaking the 
link between CRA activity and the low- and moderate-income 
communities and, in particular, communities of color for whom 
the law was meant to bring redress for decades of systemic 
discrimination.
    A real head scratcher here is the fact that the banks 
themselves--the banks themselves--are deeply concerned about 
this proposal and believe that it leads to a worse outcome for 
everyone than the current CRA framework. The fact that OCC is 
taking a shotgun approach to the rulemaking, and they issued a 
request for data to support this new rulemaking after 
publishing the rule is further evidence of a process that is 
being railroaded.
    Finally, by abandoning the interagency process, Mr. Otting 
is making it more likely that Congress will have to legislate 
on CRA and that banks may face a fragmented national CRA 
landscape going forward with four more of the vastly different 
CRA regimes, including: one, the current CRA framework for 
banks with assets under $500 million, which were exempted by 
the OCC-FDIC proposal; two, the new OCC-FDIC framework for the 
banks to which it applies; and three, the Fed's framework which 
may be put forward as a rule. Some States have indicated that 
they may add CRA-like rules for banks in the event that the 
OCC's framework is adopted. This is regulatory chaos and should 
have been entirely avoidable.
    I applaud the Federal Reserve (Fed) for putting forward a 
methodical, data-driven approach to CRA modernization, and 
strongly encourage them to publish their proposal as a rule to 
allow comments and to contrast with the OCC's proposal.
    And finally, I would strongly encourage the OCC and the 
FDIC to allow as much time as necessary, including a 120-day 
comment period, to fully consider comments and data analysis of 
their respective proposals and to explore options to eventually 
merge their process with the Fed's to allow a continued 
national harmonization of CRA rules.
    With that, I recognize the ranking member of the 
subcommittee, the gentleman from Missouri, Mr. Luetkemeyer, for 
his opening statement.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    I would like to start out with a few facts about 1977. In 
1977, the Dow Jones closed the year in the 3,000s. Currently, 
it is almost 29,000. In 1977, a gallon of gas cost 65 cents. 
Currently, it is $2.59. In 1977, the first Star Wars movie was 
released, and we still are getting more Star Wars movies today. 
And last, but not least, in 1977, Jimmy Carter signed into law 
the Community Reinvestment Act (CRA).
    The CRA was originally enacted to ensure that banks were 
appropriately servicing their communities. However, more than 
40 years after its enactment, and 30 years since it was 
significantly amended, the CRA has become an outdated, onerous 
regulation that does not reflect today's banking sector.
    In a world where handheld computers, internet access, and 
mobile banking have become norms, establishing CRA assessment 
areas solely based on geographic location, in my judgment, is 
an outdated notion. The OCC and FDIC's proposed rule to amend 
and modernize the CRA would provide clarity and transparency by 
requiring regulators to develop and publish a list of 
preapproved CRA activities, allowing banks to accurately assess 
and meet the needs of the communities instead of waiting for an 
examiner to make a determination after the fact.
    In addition to examining the geographic location of a bank, 
the proposal would include additional assessment areas based on 
deposits of a bank, taking into account the technological 
advances in banking and online banks. By considering deposits, 
the rule would expand CRA assessment areas of banks, limiting 
CRA deserts and decreasing CRA saturation in many urban areas.
    The proposal contains many provisions aimed at helping 
banks serve their communities. However, I would like to point 
out the process this Administration has taken in developing 
this proposal. The notion of updating the Community 
Reinvestment Act is not new. Regulators in this Administration 
and the previous Administration have a long history of 
collecting information regarding CRA modernization. In fact, 
the Federal Financial Institutions Examination Council (FFIEC) 
began conducting field hearings in 2010 on CRA. And in 2018, 
the Treasury issued recommendations to update the law as well.
    Continuing the transparency of this rulemaking process, the 
OCC issued an advance notice in August of 2018 and received 
over 1,500 comments before issuing a proposed rule. The OCC has 
also met with more than 1,100 individuals from consumer and 
community groups, academia, trade associations, and the banking 
industry to receive information on specific areas of the CRA 
that need to be addressed in this rule. And in accordance with 
the Administrative Procedure Act, the OCC and the FDIC have 
announced a 60-day comment period for this proposal to solicit 
even more information and feedback from stakeholders.
    I would encourage all parties involved to submit comments 
on this proposal to ensure it increases transparency for 
institutions and consumers while improving the ability of banks 
to serve their community.
    While the process throughout this proposal has been 
transparent, the Federal Reserve ultimately did not join the 
FDIC and the OCC in this rulemaking. Instead of the prudential 
regulators joining together to issue one consistent update to 
the law, an apparent bureaucratic turf war could leave bankers 
with the uncertainty of a bifurcated rule. Hopefully, by the 
time this rule is finalized, the Administration will achieve a 
uniform rule to modernize CRA. And hopefully, today we can 
learn more about efforts to achieve that goal.
    And with that, Mr. Chairman, I look forward to the 
testimony of the witnesses before us, and I yield back.
    Chairman Meeks. The gentleman yields back.
    I now recognize the gentleman from Georgia, Mr. Scott, for 
1 minute.
    Mr. Scott. Thank you, Mr. Chairman.
    As we know, last month, the OCC and the FDIC put forward a 
notice of proposed rulemaking that would make changes to the 
Community Reinvestment Act. But, Mr. Chairman, our committee 
has to make sure that any changes that they may offer do not 
weaken the law's work to undo harmful, racially discriminatory 
practices in banking. That is what the law was put in place to 
do, so that we will be able to make sure that we end any 
discrimination against customers based upon where they live or 
racial indicators, as opposed to their creditworthiness.
    And also, Mr. Chairman, we are moving rapidly into a highly 
technological age. That makes it even more important that we 
understand and we make sure that, as we move in this advanced 
technological age with online lending and mobile banking, that 
we be extra careful, because we don't have enough of the 
profound financial literacy out there for people to be able to 
handle this advanced technology. Our work is before us.
    Thank you.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the ranking member of the full Financial 
Services Committee, the gentleman from North Carolina, Mr. 
McHenry, for 1 minute.
    Mr. McHenry. Thank you, Chairman Meeks, and thank you for 
your thoughtful leadership, and I thank you, as well, Ranking 
Member Luetkemeyer.
    I applaud the OCC and the FDIC for proposing a CRA reform 
package. I am dismayed that the Federal Reserve has been 
dragging their feet and won't participate in this process. I 
think it is important that we update CRA. The last time it was 
updated, it was before most Americans even had dial-up 
internet, and a smartphone was any phone that wasn't connected 
by a long wire into a wall. So, needless to say, it was before 
mobile banking. It was before online banking helped to serve so 
many in our community. And before the branching strategy of 
banks changed, and it has changed severely and dramatically in 
the last 5 to 10 years.
    This proposal takes into account all of those changes. I 
think that is positive. So, I look forward to hearing from the 
witnesses and stakeholders about how we communicate additions 
and changes and we get this thing done in a timely fashion.
    Chairman Meeks. The gentleman's time has expired.
    Today, we welcome the testimony of, first, Ms. Gerron Levi, 
director of policy and government affairs at the National 
Community Reinvestment Coalition. Ms. Levi is an attorney with 
nearly 20 years of Federal and State Government affairs 
experience. Her background includes serving in the Maryland 
General Assembly, where she authored laws on education, crime, 
and ex-offender reentry, and she was a member of the National 
Conference of State Legislators, the National Black Caucus of 
State Legislators, the National Foundation of Women 
Legislators, and the American Council of Young Political 
Leaders.
    During her tenure, the Maryland State's Attorneys' 
Association named her as the Legislator of the Year in 2010. 
She also served as an assistant director of the Legislation 
Department of the AFL-CIO, and as a legislative representative 
for the Laborers' International Union.
    Second, Ms. Paulina Gonzalez-Brito is the executive 
director of the California Reinvestment Coalition (CRC). Ms. 
Gonzalez has worked for over 20 years leading economic justice 
and organizing campaigns to expand workers' rights, immigrant 
rights, and the rights of low-income people, and people in 
underrepresented communities of color. Under her leadership, 
CRC has grown to 300-plus members, gained high visibility, 
expanded its focus areas to include immigrant financial 
protection and fines and fees work, and negotiated community 
reinvestment agreements with 5 banks worth more than $25 
billion.
    She currently serves on the Community Advisory Council of 
the Federal Reserve Bank of San Francisco, the San Francisco 
Municipal Bank Feasibility Task Force, and the Board of 
Directors for the National Association for Latino Community 
Asset Builders, and she was formerly a member of the CFPB's 
Consumer Advisory Board.
    Third, Mr. Eric Rodriguez is the senior vice president for 
policy and advocacy at UnidosUS. Mr. Rodriguez oversees the 
Office of Policy and Advocacy, which is charged with directing 
the organization's legislative affairs, public policy research, 
policy analysis, and field advocacy work. He is responsible for 
UnidosUS's Federal and State legislative priorities and agenda. 
Mr. Rodriguez has extensive experience overseeing the UnidosUS 
public policy and advocacy activities on a wide range of 
issues.
    From 2007 to 2008, he served as deputy vice president of 
the public policy department, and previously directed the 
Policy Analysis Center. His background also includes work on 
such issues as tax policy, Social Security reform, welfare 
reform, workforce development, retirement security, and housing 
and financial market regulations.
    Mr. Rodriguez also serves on the boards of the Food 
Research and Action Center, the Fair Election Center, and the 
UnidosUS Action Fund, and he is a member of the National 
Academy of Social Insurance.
    Prior to UnidosUS, Mr. Rodriguez was a Congressional 
Hispanic Caucus Institute fellow, and served in U.S. 
Representative Nydia Velazquez's New York office.
    Fourth, Ms. Hope Knight is the president and CEO of Greater 
Jamaica Development Corporation. Ms. Knight has served as 
president and CEO of Greater Jamaica Development Corporation 
since 2015--I should say, the Greater Jamaica Development 
Corporation in New York. In that capacity, she has advanced the 
economic growth, community bank building, and sustainable real 
estate development, and has immensely revitalized and 
strengthened the Greater Jamaica/Queens region.
    Appointed by Mayor Bill de Blasio, Ms. Knight also serves 
on the New York City Planning Commission, a role which supports 
planning for equitable economic expansion, strengthening of 
housing affordability, and increasing job growth in New York 
City.
    Prior to leading the Greater Jamaica Development 
Corporation, she was chief operating officer for the Upper 
Manhattan Empowerment Zone, overseeing over $150 million in 
direct capital, leveraging over $1 billion in private capital, 
and working on projects such as the East River Plaza, the 
Harlem Stage, and the Victoria Theater. She has also served as 
vice president at Morgan Stanley in the Institutional Equities 
Division U.S., and as vice president of strategic planning and 
e-commerce at Morgan Stanley Japan.
    And finally, Ms. Faith Bautista is the president and CEO of 
the National Diversity Coalition. She is also the president and 
CEO of the National Asian American Coalition, a HUD-approved 
home counseling agency, and the nation's leading Asian American 
nonprofit advocating against foreclosures, advocating for 
greater economic and small business development, and advancing 
the growing economic and social power of Asian Americans.
    Appointed by President Trump's Administration in 2017, Ms. 
Bautista is currently serving a 4-year term as one of the 5 
members in the U.S. Treasury Department's Community Development 
Financial Institutions (CDFI) Fund, and the Fund Community 
Advisory Board, and a member of the advisory board for the 
Federal Communications Commission on broadband adoption and 
diversity, and for the California Utility Diversity Council. 
She serves on the corporate advisory board for First Republic 
Bank, Royal Business Bank, Citizens Business Bank, and Charter 
Communications, and she was a former advisor and board member 
for CTI OneWest Bank.
    You will each be recognized for 5 minutes to provide an 
oral presentation of your testimony. And without objection, 
each of your written statements will be made a part of the 
record.
    I now recognize Ms. Levi for 5 minutes to give your oral 
presentation of your testimony.

 STATEMENT OF GERRON S. LEVI, DIRECTOR, POLICY AND GOVERNMENT 
   AFFAIRS, NATIONAL COMMUNITY REINVESTMENT COALITION (NCRC)

    Ms. Levi. Good afternoon, Chairman Meeks, Ranking Member 
Luetkemeyer, and members of the subcommittee. Thank you for the 
opportunity to testify for this important hearing on the 
winners and losers in the OCC's proposed rule.
    I can say without equivocation that the winners would be 
the nation's largest banks, who would promote glowing CRA 
ratings to the public because they will have easier ways to 
meet their CRA obligations. The losers would be low- and 
moderate-income home buyers, renters, small businesses, small 
farms in their community, and the CRA ecosystem built to 
support better economic opportunities for them.
    We concur completely with the FDIC's Mr. Gruenberg, for 
this is a deeply misconceived proposal. The purpose of CRA is 
unmistakable: Congress aimed to reverse disinvestment 
associated with years of government policies that deprived low- 
to moderate-income (LMI) areas and communities of color of 
credit by the practice of redlining. That was and is the reason 
for the law, and the legacy is still with us today, and lending 
discrimination is ongoing.
    The statutory design of the CRA and its regulatory 
framework to date has been about curing for market failures 
that keep some neighborhoods thinly traded, even when there are 
profitable lending and investing opportunities available for 
the financial institutions chartered to serve them in unmet 
credit needs that are safe and sound to meet.
    NCRC's CEO, Jesse Van Tol, has called this a stealth 
gutting of CRA because it is a fundamental rewrite that 
significantly changes incentives under the law, but only the 
agencies fully understand its impacts, the new benchmarks and 
thresholds, but they fail to share what they know and estimate 
with the public. Our forthcoming Freedom of Information Act 
(FOIA) request will ask them to share more.
    At the outset, we have a must-do list for the agencies 
about the process in the name of fairness and transparency. 
First, extend the public comment period. The proposal is 
complex and has many interconnected elements. The impact on 
bank incentives to participate in a range of financing 
activities cannot be understood and analyzed in 60 days, plain 
and simple. We thank the members of this committee who have 
urged the regulators to give the public more time.
    Second, release the missing data and analyses. The agencies 
have estimated the impact of their proposed numeric benchmarks 
and thresholds using a variety of bank samples and other 
information. All of the underlying data, analyses, and modeling 
of the impact on bank ratings and performance should be 
released. Federal Reserve Governor Brainard laid out some 
illustrative data and charts last week about their approach, 
and that is a good start.
    Third, complete and finalize the agency request for 
information (RFI) on data released on Friday, that in cruel 
irony closes for comment the day after the overall rulemaking. 
The data RFI will inform critical pieces here of the CRA 
evaluation measure or dominant single metric and presumptive 
ratings, including how to measure bank capacity. We really need 
to know this so that we can meaningfully comment on how severe 
the rationing of CRA credit will be.
    On to the substance. The CRA evaluation measure is an 
overly determinative single metric that ensures rationing of 
CRA credit. The public comments on all sides were clear: no 
single metric. The agency has added a supplement, but we have a 
single dollar volumetric triggering presumptive CRA ratings, 
and more inflation is built into it. The presumptive CRA 
ratings are arbitrary benchmarks that undermine the economic 
rationales for CRA, and the agency should really show their 
work on them. The expansion of CRA qualifying activities 
extends credit to bank activities done in the ordinary course 
of business and upends exam incentives that keep LMI 
considerations at the heart of the law.
    The new deposit-based assessment areas again have a lot of 
the arbitrary triggers in them and their data limitations. For 
example, how many credit deserts would be picked up, if any, by 
that proposal?
    The retail lending distribution test, pass-fail, has 
arbitrary triggers as well on demographics and peer competitors 
and is overall a weaker incentive for banks to facilitate home 
ownership, small business, and small farm lending. The service 
test is virtually eliminated, and the 1 percent credit for bank 
branches in LMI areas is inadequate, and exams for affordable 
financial services and products is wiped out.
    I look forward to discussing more about this proposal, but 
the largest U.S. banks made more than $120 billion in 2018, an 
all-time high. CRA standards for local LMI reinvestment should 
be strengthened and not weakened, plain and simple.
    Thank you.
    [The prepared statement of Ms. Levi can be found on page 
183 of the appendix.]
    Chairman Meeks. Thank you for your testimony.
    Ms. Gonzalez-Brito, you are now recognized for 5 minutes.

   STATEMENT OF PAULINA GONZALEZ-BRITO, EXECUTIVE DIRECTOR, 
            CALIFORNIA REINVESTMENT COALITION (CRC)

    Ms. Gonzalez-Brito. Thank you, Chairman Meeks, Ranking 
Member Luetkemeyer, and members of the subcommittee, for 
holding this important hearing and inviting CRC to testify.
    Good afternoon. My name is Paulina Gonzalez-Brito. I am 
Chicana, the daughter of immigrants from my ancestral land of 
the Purepecha people in Mexico.
    CRC is the largest statewide reinvestment coalition in the 
country, with a membership of over 300 organizations that serve 
low-income communities and communities of color. I am also a 
proud member of the National Association for Latino Community 
Asset Builders (NALCAB), and CRC is a proud member of the 
National Community Reinvestment Coalition.
    You should know that CRC works. While the CRA can be 
improved, Comptroller Joseph Otting's proposal is a 
deregulatory scheme designed to help the largest and most 
powerful banks. It will weaken CRA rules, undermine the purpose 
of the statute, and will ultimately harm low-income communities 
and communities of color.
    When Comptroller Otting was CEO, OneWest had one of the 
worst reinvestment records in the State. CRC tracks 
reinvestment data in California, and in 2013, out of 12 banks 
analyzed, OneWest ranked 10th or 11th from the bottom. As one 
example of OneWest's lack of reinvestment activity under Mr. 
Otting's leadership, the bank made very few small business 
loans. In the final quarter of June 2015, under Mr. Otting's 
leadership, OneWest did one-tenth of the amount of small 
business lending in comparison to banks of the same size.
    As another example, during Mr. Otting's leadership, OneWest 
had 15 percent of its branches in low- to moderate-income (LMI) 
communities compared to 30 percent for the rest of the 
industry.
    Mr. Otting has written this CRA rule so that banks like the 
one he led that do little reinvestment can ace their CRA tests. 
For example, the Comptroller's proposed CRA rule benefits banks 
by loosening the rules around small business lending and by 
devaluing the importance of branches in LMI census tracts.
    On redlining, Comptroller Otting certainly does have 
experience. While Mr. Otting was CEO of the bank, OneWest had 
70 branches, but only one branch was located in a Native 
American majority census tract, and there were no branches, 
none, in African American majority census tracts.
    During his tenure, over a 2-year period, the bank 
originated only two mortgage loans, that is two, to African 
Americans in the greater Los Angeles area. That is hard to 
believe, given the size of L.A.'s African-American population.
    It would be bad enough if OneWest merely did a poor job 
meeting community credit needs as required by the CRA. But, in 
fact, the bank that Joseph Otting ran also substantially 
damaged community credit needs through mass foreclosures. Most 
of this harm was inflicted on communities of color. Between 
2011 and 2015, when Mr. Otting was CEO of OneWest, the bank 
foreclosed in neighborhoods of color 3 times as often as it 
made mortgages in neighborhoods of color.
    We are concerned that the Comptroller's proposal will lead 
to a return to redlining and more harm to communities, given 
its focus on the one ratio that prioritizes quantity over 
quality and overall numbers over serving local community needs.
    CRC and over 100 organizational opponents of the OneWest-
CIT merger raised many of these concerns during the public 
comment process for the CIT-OneWest merger. As part of the 
merger, Mr. Otting solicited letters of support from his Wall 
Street contacts via a form letter on the bank's website. Our 
analysis of those letters observed a number of anomalies. Our 
suspicions were confirmed when CRC received a call from a 
supposed supporter of the merger who was upset his email 
address had been used to support a bank merger he knew nothing 
about. He said, ``My identity has been stolen.''
    Our subsequent FOIA request to the OCC uncovered documents 
reflecting email exchanges with the OCC from individuals upset 
that they had been listed as supporters for a merger they had 
never heard about. The letters at issue, supposedly submitted 
by these supporters, appear to be the same form letter that Mr. 
Otting had urged his Wall Street contacts to submit via the 
bank's website.
    What does this mean for the integrity of the CRA public 
comment period overseen by Mr. Otting himself?
    We also have concerns, based on Mr. Otting's public 
statements, regarding his ability to fairly receive and 
incorporate public input. Comptroller Otting was quoted as 
saying, ``Certain community groups know how to hold you hostage 
during that process, and they use your lack of compliance in 
between the reviews to be able to do that.''
    Perhaps, most alarmingly, Comptroller Otting was quoted as 
saying, ``We won't tolerate groups that do not provide services 
to these communities to disrupt the process and affect our 
decisions.'' Perhaps, he doesn't believe in democracy.
    These comments suggest that the Comptroller cannot be 
trusted to objectively consider public comments from community 
groups, just as he is soliciting public comments on plans to 
weaken the nation's primary anti-redlining law. The proposed 
rule led by Comptroller Otting will do great harm to 
communities of color and low-income communities while advancing 
the interests of big banks who have little interest in 
reinvestment.
    I thank you for the opportunity to discuss our concerns 
today.
    [The prepared statement of Ms. Gonzalez-Brito can be found 
on page 52 of the appendix.]
    Chairman Meeks. Thank you for your testimony.
    Mr. Rodriguez, you are now recognized for 5 minutes.

STATEMENT OF ERIC RODRIGUEZ, SENIOR VICE PRESIDENT, POLICY AND 
                       ADVOCACY, UNIDOSUS

    Mr. Rodriguez. Good afternoon. Thanks to the chairman and 
ranking member, as well as the members of the subcommittee, for 
the opportunity to testify today. Our remarks will echo many of 
the concerns already raised.
    My name is Eric Rodriguez. I am a senior vice president of 
Policy and Advocacy for UnidosUS, formerly the National Council 
of La Raza. UnidosUS is the largest Hispanic civil rights and 
advocacy organization in the United States. For over 25 years, 
I have worked on issues such as the Community Reinvestment Act 
that lie at the intersection of economic inequality and civil 
rights.
    UnidosUS is a unique civil rights organization in three 
critical ways. One, we combine advocacy with research and 
analysis of the Latino community. Two, we leverage our policy 
expertise with on-the-ground experience, administering 
culturally competent housing and financial capability programs 
that are proven to reduce wealth and income disparities in 
communities. And three, we partner with both government and 
industry to change practice in ways that advance economic 
interest of the Latino community.
    First, I want to touch on very quickly the important 
history of CRA, then we'll highlight just a few of our concerns 
with the plan by the OCC and the FDIC that we also believe 
would really weaken the intent of the CRA. And last, we will 
recommend an alternative approach.
    The first thing is, discrimination and disparate impact in 
banking has been persistent throughout our history and often 
exacerbated by our public policy. For example, in the 1930s, 
the Home Owners' Loan Corporation created a universal risk 
appraisal method that classified neighborhoods based on 
occupation, income, race, and ethnicity of residents, literally 
drawing red lines where people of color constituted the 
majority. Limiting access to credit has consistently undermined 
the vitality and the mobility of people, of color and the 
neighborhoods where they live.
    In many ways, Chicago served as the birthplace for the 
resistance movement against redlining decades ago. In 1969, the 
Westside Coalition of Community Organization, in a Polish 
neighborhood with a growing Puerto Rican population, identified 
the problem well. Members of the community had been denied 
loans despite good credit histories. They protested until the 
group secured a meeting with the bank's president and the 
chairperson of the board or directors, and this began and 
sparked a nationwide campaign to place equitable community 
reinvestment on the national agenda.
    Subsequent research documented nationwide redlining and 
bolstered the case for action, and Congress then acted with the 
passage of two important and critical bills: the Home Mortgage 
Disclosure Act of 1975 and the Community Reinvestment Act of 
1977.
    Over 40 years, CRA has encouraged regulated banks to lend 
to LMI communities of color. CRA helped to revitalize 
neighborhoods by increasing mortgage and small business 
lending. In our research, based on a national survey of 
mortgage origination data from 2014 to 2018, we found that the 
CRA had bolstered home lending for Latinos, and facilitated 
between 15 percent and 35 percent of home loans to Latinos in 
LMI census tracts. This was about 2 to 3 times the share of 
loans to their white peers in the same census tracts.
    The OCC and FDIC's recent proposal seeks to update the CRA. 
We certainly agree CRA should be modernized. But we have grave 
concerns with their approach, and I will just highlight a few. 
First, in order to enforce the CRA, regulators currently look 
at banks' assessment areas defined in the regulations regarding 
where bank branches are or some physical presence located to 
gauge whether a bank is, in fact, meeting the credit needs of 
its community.
    With the growth of banking on the internet and smart 
devices, the current approach for delineating assessment areas 
should certainly be expanded but not at the expense of physical 
branch locations.
    As discussed in our own research, the future of banking 
report, coauthored with policy, linked physical presence still 
has an impact on whether residents of LMI communities have 
access to mainstream banking. Research also shows a direct 
correlation between the number of bank branches located in the 
neighborhood and the availability of credit.
    Second, the plan would allow for community development 
activities that are outside of the original intent of the CRA. 
These activities do not serve the credit needs of their 
communities. We are troubled by the laundry list of qualifying 
regulatory criteria proposed. The new approach would weaken the 
impact of CRA on LMI communities.
    Third, the proposal does not articulate how regulatory 
agencies would solicit, review, and weigh public comments of 
community organizations. In essence, the plan would strip 
``Community'' out of the Community Reinvestment Act.
    In the 4 decades since CRA was proposed, the law has 
increased bank lending in LMI communities. For Latinos, it is 
still important and relevant. In 2017, an FDIC national survey 
of unbanked and underbanked households found that while 6.5 
percent of households overall were unbanked, 14 percent of 
Latino households, and 16.9 percent of Black households were 
underbanked.
    A better approach to modernizing the CRA would be for 
regulators to negotiate with the civil rights community and 
lawmakers and work with the Federal Reserve to ensure one 
uniform set of rules for financial institutions to follow. 
Rules of the road that are flexible enough to meet the 
challenges of a changing marketplace while continuing to 
effectively address disparities is the goal we all share.
    Thank you.
    [The prepared statement of Mr. Rodriguez can be found on 
page 215 of the appendix.]
    Chairman Meeks. Thank you for your testimony.
    I now recognize Ms. Knight for 5 minutes.

 STATEMENT OF HOPE KNIGHT, PRESIDENT AND CEO, GREATER JAMAICA 
                 DEVELOPMENT CORPORATION (GJDC)

    Ms. Knight. Good afternoon, Chairman Meeks, Ranking Member 
Luetkemeyer, and members of the subcommittee. Thank you for the 
opportunity to testify today.
    My name is Hope Knight, and I am president and CEO of the 
Greater Jamaica Development Corporation (GJDC). GJDC is a not-
for-profit that works to promote responsible development in 
Jamaica, New York, and southeast Queens.
    As a leader of an economic development organization in a 
formerly redline community, the CRA is foundational to my work. 
I have studied the Notice of Proposed Rulemaking (NPRM) and had 
the honor of helping to lead a tour of Jamaica for Comptroller 
Otting and the OCC. I am here today to discuss significant 
concerns I have about the ideas presented in the NPRM and that 
I believe would significantly weaken the CRA and hurt the 
community that I serve.
    That community, Jamaica, Queens, shares a history with many 
urban communities of color across the United States. Redlined 
in the 1930s, Jamaica struggled to attract private investment. 
In the 1960s and 1970s, Jamaica's economic base further eroded 
as white flight drained the downtown of residents and 
businesses. The culminating disinvestment left Jamaica in a 
vicious economic cycle.
    Targeted Federal programs like the CRA helped start a 
reversal of this cycle. Recently, and owing in part to their 
interest in securing CRA credit, banks financed transformative 
development projects in Jamaica, including ones that bring more 
affordable housing and good jobs to southeast Queens. As a 
community development financial institution (CDFI), GJDC has 
been able to lend to small businesses with the help of banks' 
contributions often given to meet CRA obligations.
    However, Jamaica still bears the legacy of redlining, 
suburban flight, and disinvestment. As evidenced in our tour 
with Comptroller Otting, many areas of Jamaica remain banking 
deserts. Potentially catalytic projects struggle to secure 
financing and low-income residents have trouble accessing 
loans. If changes are made to the CRA that dilute its impact, 
Jamaica will struggle against such economic headwinds, and the 
recent progress growing Jamaica's economy will be put at risk.
    With regard to the NPRM, I am particularly concerned by 
several proposals. From my work in economic development, it has 
become clear that to be effective in spurring equitable 
economic development, regulations must have clear and well-
defined geographic targets. Instead of focusing on a clear 
geography, the proposed regulation greatly expands where banks 
can get CRA credit, allowing for investment in areas outside of 
local assessment areas, making it less likely that financial 
assistance will flow to communities and projects that need it 
most.
    As one example, under the rules of the NPRM, any investment 
in a low-income Opportunity Zone would be an eligible activity 
without any consideration of economic development benefits or 
community needs. Retail banking is of paramount importance to 
neighborhoods like Jamaica. As Comptroller Otting mentioned 
after his tour of Jamaica, there are areas in Jamaica that are 
served by few or no bank branches.
    Compounding this, the nation's persistent digital divide 
creates a barrier to accessing financial e-services for those 
in low-income census tracts. Without branches, many residents 
depend on high-cost alternatives, like corner store ATMs and 
check-cashing services. As such, I am very concerned by the 
proposed regulatory changes that eliminate the current large 
bank service test and examination of basic banking accounts for 
LMI customers.
    By moving forward on proposed regulatory changes without 
the Federal Reserve, the OCC and the FDIC would create a two-
tier regulatory system that adds complexity and confusion to an 
already complicated sector. While larger money center banks may 
be able to navigate this added burden of complexity without too 
much difficulty, smaller institutions may be hit hard, 
especially minority depository institutions (MDIs).
    The CRA is complex. Changes to the regulation will have 
far-reaching impacts. The short comment period does not allow 
enough time for adequate comment. The comment period should be 
extended to a total of 120 days. The changes to the CRA 
regulations currently proposed by the OCC and the FDIC will 
hurt economic progress in LMI areas and undermine the anti-
redlining intent of CRA. As such, I oppose the changes 
described in the NPRM, and I look forward to answering any 
questions related to my testimony.
    Thank you.
    [The prepared statement of Ms. Knight can be found on page 
179 of the appendix.]
    Chairman Meeks. Thank you for your testimony.
    And, Ms. Bautista, you are now recognized for 5 minutes.

   STATEMENT OF FAITH BAUTISTA, PRESIDENT AND CEO, NATIONAL 
                   DIVERSITY COALITION (NDC)

    Ms. Bautista. Thank you so much.
    Before I read my testimony, I just want to tell you, don't 
believe everything that Ms. Paulina is saying because we are 
seeing--we had a group counseling agency, and we have helped so 
many homeowners in California save their home, and OneWest 
saved a lot of the people who were facing foreclosure. Thank 
you.
    We must do better. NDC and the National Asian American 
Coalition (NAAC), which I also lead, represent underserved and 
minority people and small businesses who are left behind by our 
current system. I work directly in our communities to provide 
lending, counseling, and training solutions to our most 
vulnerable.
    For NDC, reducing the number of underbanked is our North 
Star. We believe CRA has failed for one primary reason: CRA 
qualifying lending and investments are not measured. Whether 
this is by design or by neglect, it is harmful to the 
communities I have spent my life serving.
    It is remarkable and offensive that the current CRA 
regulations do not track CRA activity on an industrywide level. 
Frankly, it might be the only data that regulators do not think 
worth collecting and evaluating systematically.
    I have had the honor to meet with the Federal Reserve 
Chairs and Governors over my decades of advocacy. At each 
meeting, I ask them the same simple question of whether CRA 
lending and investments have been increasing or decreasing over 
the prior 5 years. The answer each time is that they simply do 
not know. Conveniently, the current approach to CRA provides no 
way of measuring the number of loans or the volume of dollars 
being invested in underserved minority neighborhoods. That 
needs to change.
    This information is necessary to any serious data-driven 
analysis seeking to understand the real impact of CRA. With no 
data and no measurement comes no accountability.
    The current approach turns a blind eye to low-income and 
minority communities. For example, instead of using metrics to 
gain merger approvals, banks simply make unregulated promises 
to increase CRA investments in a future that never comes. 
Today's hearing is to determine who the winners and the losers 
would be from CRA reform, but the current regulations do not 
collect the data necessary to measure who is currently winning 
or losing.
    Working every day in communities of color, I can tell you 
today that the CRA losers are America's low-income communities 
and minorities. They are the people served by NDC, NAAC, and 
our members. The stories of abuse and neglect faced by 
America's immigrants, minorities, and others we serve would 
break your heart.
    NDC believes that underserved communities will only win 
when there is a real transparency that measures each bank's CRA 
activity objectively, discloses it timely and publicly, and 
allows comparison against peers and regulatory targets. Data 
and accountability must replace excuses and stories.
    Today, the question should not be if the CRA proposal is 
perfect. It is not. Instead, we must ask if it improves upon 
the current approach to CRA and provides a new paradigm able to 
break the cycle of poverty and neglect faced by America's most 
vulnerable communities. The definitive answer is yes.
    The OCC and FDIC proposal would improve the current system 
in three primary ways. First, it will clarify what qualifies 
for CRA credit. No more guessing. That helps community planners 
and advocates makes the most of our resources.
    Second, it updates where a bank receives credit for CRA. It 
recognizes the advent of the internet, ending loopholes for 
internet banks and wholesale banks. This will enable banks who 
help underserved communities where they have depositors, but no 
banks, receive CRA credit.
    Third, it will provide timely and transparent reporting 
that measures CRA-related activities using standard metrics. We 
will all finally be able to confirm that banks are increasing 
their CRA activity in underserved and minority neighborhoods.
    NDC believes the proposal set out by the OCC and the FDIC 
will increase CRA activity by over $100 billion. Should that 
not occur, the OCC and the FDIC must commit that they will 
raise the requirements for ``satisfactory'' and ``outstanding'' 
CRA ratings to ensure that CRA investments increase as 
promised.
    The proposal also closes loopholes that currently allow 
bankers to trade loans back and forth between banks to claim 
multiple CRA credits for the same loan. It will also end the 
CRA credit for gentrification and displacement, when banks 
finance wealthy people purchasing homes in poor neighborhoods.
    It is true that the proposal can benefit from further 
modifications during the public comment period. For instance, 
loans guaranteed by the Federal Government should not receive 
CRA credit. Double dipping on Federal subsidies does not 
increase the amount of capital reaching underbanked 
communities.
    We pray that the Federal Reserve awakens to the urgent need 
for change. Today's status quo continues to fail over 30 
million disproportionately minority American households. Fear 
of unintended consequences is not a good reason to stick with a 
failed system that for 4 decades has resulted in generational 
poverty and disparate impact in our communities of color.
    We are confident that this proposal will at long last begin 
the process of reducing the unacceptable number of underbanked 
in America. Thank you so much.
    [The prepared statement of Ms. Bautista can be found on 
page 45 of the appendix.]
    Chairman Meeks. Thank you.
    I thank all of the panelists for their testimony today.
    And before I recognize myself, I ask for unanimous consent 
to enter four documents into the record. The first is a 
statement for the record from Mr. Richard Hunt, the president 
and CEO of the Consumer Bankers Association, and the statement 
speaks to the importance of getting CRA modernization right and 
ensuring that concerns raised are adequately addressed. It is 
noteworthy that in this document, the CBA raises concerns with 
the OCC's requests for data, which came after the publication 
of the rulemaking.
    The second statement for the record is from Mr. Noel Poyo, 
executive director of the National Association for Latino 
Community Asset Builders. In this statement, Mr. Poyo outlines 
key concerns with the OCC and FDIC's rulemaking, including 
ignoring comments from the ANPR and diluting the focus on LMI 
communities, likely reducing investments in rural and other 
hard-to-serve communities and other issues.
    The third statement for the record is from Mr. Aaron 
Glantz, senior reporter at Reveal from The Center for 
Investigative Reporting. And as a reminder, Mr. Glantz 
testified at our hearing on CRA modernization in April 2019 on 
his groundbreaking report on modern-day redlining. And this 
statement for the record provides a detailed, troubling account 
of Mr. Otting's time at OneWest Bank.
    And the fourth statement for the record is from Mr. David 
Dworkin, president and CEO of the National Housing Conference. 
In this statement, he reminds us of the history of 
discrimination and redlining that led to the passage of CRA and 
the broad agreement on key colors for CRA reforms that outline 
specific areas where the OCC's proposal will make it fall short 
of the commitment to holding true to CRA's original intent.
    Without objection, it is so ordered.
    And I now recognize myself for 5 minutes for questions.
    My first question will go to Ms. Levi. As I stated in my 
opening remarks, I have had private conversations with banks 
and banking groups, and they are quick to state that they 
didn't ask for the OCC's framework, and expressed a list of 
concerns if this approach were to be implemented, posing 
operating complexity, reputational risks, and significant 
uncertainty. And in the letter I just entered into the record 
from the Consumer Bankers Association (CBA), they state that 
more analysis must be undertaken by stakeholders to better 
understand the impact of the new metrics that will be used to 
measure CRA activity for individual institutions in the 
communities that they serve. And the CBA appreciates the OCC's 
recent effort to consider the impact of a more quantitative 
approach through additional data collection, but feels the true 
cost of reforms must be understood before dramatic changes are 
made. Can you speak on this?
    Ms. Levi. I can, and we have heard a lot of the same 
concerns. I was at a housing tax credit conference last week, 
and for a lot of the folks who participate in that market, they 
are concerned about more financing gaps, not less, because the 
incentives under this proposal are off.
    It also points to the process concerns I outlined. We don't 
have enough time. It is complex. It is interconnected. And the 
agency has not made it easy because they have not shared a lot 
of their data analyses and modeling.
    Chairman Meeks. Now, is there--or how does the OCC's 
proposed rulemaking impact the link between a bank's CRA 
activity and direct lending, especially mortgage lending to 
low-income communities of color?
    Ms. Levi. The bottom line is that the retail lending 
distribution test in this proposal is weaker, and is going to 
make addressing problems this committee is focused on, for 
example, the racial wealth gap, a lot harder to get banks to 
participate in. Also, you can fail in half of your local 
assessment areas and still pass at the bank level.
    There are a number of problems with it, and some arbitrary 
thresholds in it. And there is no review of mortgage lending in 
LMI neighborhoods at all.
    Chairman Meeks. Thank you.
    And, Ms. Knight, I know in your testimony you talked about 
doing a tour of Jamaica, Queens, with Mr. Otting. And during 
that tour, he saw the extent of banking deserts and the 
important needs for loans and financial services, and the great 
disparities in access to credit and housing in the community. 
Can you speak--and I know there were several other people from 
the community who were there--to the feedback that Mr. Otting 
received from the community, specifically as it relates to the 
OCC's CRA proposal?
    Ms. Knight. Thank you. We were able to show Comptroller 
Otting how few bank branches there were in southeast Queens, 
and as a result, small businesses in the community don't have 
the opportunity to develop relationships with traditional 
financial institutions. And that is something that many people 
on the tour, advocates, community leaders, spoke to the 
Comptroller about. We also were able to show him where many of 
the alternative financial activity happens in corner stores and 
check-cashing establishments.
    Chairman Meeks. Thank you.
    Mr. Rodriguez, do you consider the CRA to be a civil rights 
bill?
    Mr. Rodriguez. Absolutely. Yes.
    Chairman Meeks. Elaborate, please.
    Mr. Rodriguez. Yes. If you think about the origin of CRA 
and part of the testimony but also what we know of how 
organizers in Chicago, where they identified the problem of 
disparities where you had banks that were investing even abroad 
and not investing very much, if at all, in their own local 
communities, that is what sparked it as a major movement and 
ultimately shined a light on inequalities that needed to be 
remedied through changes through Congress. Absolutely, it is a 
civil rights law.
    Chairman Meeks. Thank you.
    My time has just about expired, so I now will recognize the 
ranking member, Mr. Luetkemeyer, for 5 minutes for questions.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Ms. Bautista, you were pretty adamant in the discussion of 
the lack of data that the Comptroller now collects under the 
CRA law. That is concerning to me from the standpoint of, how 
can they make good decisions on whether it is working or not?
    Ms. Bautista. Congressman, I think the CRA reform--we know 
that it needs to be reformed. It has been 25 years. The OCC has 
been working with this for the last 10 years and extensively in 
the last 2 years. We believe they have data, and the data that 
the OCC and the FDIC has is the same data with the Federal 
Reserve.
    Mr. Luetkemeyer. You are about the only one who, as you 
went through the process here, pointed out the problems, had 
some solutions, and also indicated the good points about what 
the law does or what points it actually fixes or things that 
you support. And it was interesting to me because I think that 
is where we can point out the problems. If we have no solution 
to the problems, we are not getting anywhere. And I think you 
and Mr. Rodriguez made the point that this has to be updated.
    The law doesn't have anything in there with regards to 
internet activity, mobile phone activity, online lending 
activity, which is a modern day, everyday practice now.
    Ms. Bautista. Correct.
    Mr. Luetkemeyer. If I was one of you, I think I would be 
concerned about some online lending that doesn't qualify for 
CRA. Some of these folks can make online loans and don't have 
to comply. That is what I would be arguing about if I were in 
your seat. I didn't hear anything like that today, which is 
surprising to me.
    But I think, Ms. Bautista, you indicated that one of the 
good points that this new rule, the proposed rule is talking 
about here is clarifying what actually qualifies for CRA. And 
to me, having been in the business for a long time and I had to 
work with this rule, this is always a problem that I had with 
it, because there are a lot of good things that an institution 
can do to invest back in its community and in any of these 
particular communities of lower- to moderate-income folks, that 
we are not getting credit for even though they do it, and they 
do it because they want to do it. They do it because they want 
the community to grow. They want to be successful, but yet they 
are not getting credit for it. And then when the examiners come 
in, they pound them over the head, because you are not doing 
anything, and it is kind of like putting a square peg in a 
round hole sometimes. It is hard to get that done.
    Do you have any other additions to the list that was 
presented that you thought would be helpful?
    Ms. Bautista. Yes, and this is what I would love about the 
CRA reform is because when I was reading it, there is like 200 
clarifying CRA. I just want to give you some example, that we 
are doing something in San Diego, and there are three banks 
that are participating. One bank did not participate because 
they were not sure if it is CRA-related, even though it is the 
right thing to do. Now, I can tell the banks, and I can justify 
that this is CRA-related because it is now identified in the 
200s. As a community organizer and very much CRA-involved, it 
is so refreshing that there are finally guidelines.
    And for the internet banking, it has changed, right, from 
25 years ago? Then, nobody deposited through their mobile. Now, 
I don't even go to the bank. Even the immigrants that I serve, 
they hardly go to the banks anymore because everything can be 
done through their iPhone. So things have changed, and we have 
to adjust to the needs, especially for low- and moderate-income 
people and people of color.
    Mr. Luetkemeyer. One of the things that concerns me is in 
the past, it was always about location, but yet whenever you 
take deposits from an area, to me, there needs to be some money 
going back in investment into those areas. You shouldn't just 
be taking deposits out. You should be investing back into those 
areas. And, to me, this new rule does that, does it not?
    Ms. Bautista. Yes.
    Mr. Luetkemeyer. To me, this is a really big deal because--
    Ms. Bautista. It is.
    Mr. Luetkemeyer. --it goes into your online lending folks. 
Wherever you get that money from, you would be putting some of 
that money back. And as far as investments, not taking 
everything from over here and investing it over there, which is 
what is being done right now to a certain extent.
    So I appreciate your comments today, and I will yield back 
the balance of my time. Thank you.
    Chairman Meeks. The gentleman yields back.
    I now recognize the gentleman from Georgia, Mr. Scott, for 
5 minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    Ms. Bautista, during your testimony, you said, ``Don't pay 
any attention to what Ms. Gonzalez was saying.'' And I wanted 
to get some clarity on that because that really got my 
attention, because that was a very profound statement, and I 
want you to explain that statement. Why shouldn't we pay 
attention to what she was saying?
    Ms. Bautista. Thank you.
    Mr. Scott. What was so profound about it?
    Ms. Bautista. Thank you for asking me that. You know, my 
daughter always tells me if you don't have anything good to 
say, don't say anything. And the reason I can say that is 
because I was there when people were losing homes. I lost my 
home in 2009, and nobody was helping me because there was no 
process. So I was very adamant in helping people who were 
losing homes. And during the financial crisis, a lot of the 
borrowers who came to the National Asian American Coalition or 
any HUD-approved counseling agency, we had to have a good 
relationship with the banks.
    At the end of the day, the lender still makes the decision, 
but Comptroller Otting, Mr. Otting then, makes sure that his 
people--I still remember Tony Edwards bringing people to all 
the outreach we have done from San Diego, Central Valley, Bay 
area, and--
    Mr. Scott. My time is slipping away. But the reason I raise 
that is because we are faced with some very biting concerns 
about this rule. And you also said that the Fed had the same 
data--data is very important here--as the OCC and the FDIC. But 
why is the Fed staying away from what you are pushing?
    Ms. Bautista. Good question, because, to me, the Federal 
Reserve--I love them, I love all three regulators. They are 
data-driven, they are research-driven. But, sir, at the end of 
the day, the people I am serving don't care about data; they 
need help now.
    Mr. Scott. Okay. Let me turn to you, Ms. Levi, and to Ms. 
Gonzalez-Brito. First you, Ms. Gonzalez-Brito. I want to ask 
you that because our primary concern here is that we have 
problems and evidence, it seems, that what Mr. Otting is 
offering not only does not enhance the purpose of the Community 
Reinvestment Act to do away with discrimination, but that it 
might increase racial discrimination. And so, we have to get to 
the clarity of this.
    So do you agree with the--do you and Ms. Levi agree with 
what Governor Lael Brainard said? She said that any proposed 
changes to the CRA regulation must be grounded in analysis and 
data to avoid unintended consequences. And do you believe this 
data is here? Go ahead?
    Ms. Gonzalez-Brito. Absolutely. And I would say that data 
does not lie. To Ms. Bautista's point, there were 36,000 
foreclosures in California alone under OneWest, Inc., and a 
third of those were when Mr. Otting was CEO. And so, data is 
absolutely important. The Federal Reserve, with Governor 
Brainard, has made their data public. They looked at 3,700 
banks, 6,000 performance evaluations, and made that data 
available to the public as they released their metrics and 
looked at, how would banks perform under those metrics that 
they are proposing? The OCC has not released that type of data, 
and it is clear now, by having an RFI process after releasing 
their proposal and then having that data not due until after 
the comment period, it means that the public is not going to be 
able--
    Mr. Scott. I know. I want to get Ms. Levi in here. Go 
ahead, Ms. Levi.
    Ms. Levi. Federal Reserve Governor Brainard really nailed 
this. And why don't we have that kind of data about this 
proposal? Implementing a big dominant, single metric framework 
that incentivizes banks to run up the numerator with a lot of 
activities that aren't focused on LMI communities and people 
who need the benefit of CRA credit is not the way to serve the 
communities that Ms. Bautista purports to represent.
    Mr. Scott. Thank you.
    Chairman Meeks. The gentleman's time--
    Mr. Scott. Mr. Chairman, maybe we can get the Federal 
Reserve in before we move forward? This is serious.
    Thank you.
    Chairman Meeks. The gentleman from Oklahoma, Mr. Lucas, is 
now recognized for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman.
    While the banking industry has changed substantially in the 
past decade with the Community Reinvestment Act, it has not 
been meaningfully revised since 1995. And I think we all know 
that we live in a different world now than we were in 20, 25 
years ago. I am sure we all can agree that CRA can be updated 
to better serve low- and moderate-income areas.
    The OCC and FDIC's proposal, I think, is a welcome change 
to the out-of-date regulations. So, first, let me turn to Ms. 
Bautista. You outlined in your testimony how the CRA has failed 
to accomplish its mission. Can you expand on how the OCC and 
FDIC's proposal recognizes that the CRA should not follow a 
one-size-fits-all approach?
    Ms. Bautista. Oh, yes. This is why, during the foreclosure 
crisis, it took so long to help people, because the banks 
always have one-size-fits-all regulations. Even for the Asian 
community, the sub-ethnic group, it is not all the same.
    What I like about this is that there are benefits to 
citizens and community members, there is local emphasis. We are 
now going to make sure that if you have a branch there over 5 
percent deposit, that they will contribute on CRA. There are 
also benefits for the development of practitioners, advocates, 
small farms, and small businesses. And like the Indian Country 
that has never been served before, I am really excited about 
that, because we have so many constituents, over 1 million, 
from whom you hear every day what they need. The Indian 
Country, the payday lending there is so much, and now with this 
increase of CRA dollars, I think the payday lending, hopefully, 
we can just bury them.
    Mr. Lucas. Ms. Bautista, you have just explained and have 
explained several times in your testimony that the new proposal 
would increase CRA activity. How can the regulators and 
Congress sustain this increase in the long term with this 
proposal?
    Ms. Bautista. We need to calibrate. Banks have a hard time 
getting outstanding CRAs. Most of them, they are okay with 
satisfactory. We need to ensure that--this is why I also like 
this, is because quarterly, they are now going to be reporting. 
Right now, they report like every 3 years or--yes, their 
examination is 3 years. I am not so technical, but now I can 
see that every 3 months or quarterly, they can do the 
reporting. So, we know that they are going to increase their 
CRA investments.
    Mr. Lucas. We have heard mentioned in the hearing about the 
comment period.
    Ms. Levi. And can I--
    Mr. Lucas. Just one second.
    Ms. Bautista, could you expand on the aspects you see of 
the OCC and the FDIC's proposal that could be improved in the 
comment period, perhaps even through a separate proposal maybe 
from the Fed? What could be made better in this comment period? 
What should people be talking about?
    Ms. Bautista. This is why we need to do a lot of outreach. 
This is about low- to moderate-income, right? This is about 
people of color, people with English as a second language. I 
think since they have been doing this for so long and extending 
it until March 9th, we have to get people involved. The people 
of color, what do you need? What should the banks be doing that 
they are not doing? What should the regulators' examination be? 
And for the Congress--and I am so glad you are doing this 
hearing, because this is like the voice of the voiceless as now 
we are telling you what is needed. So, we have a comment 
period. Let's get to work. If you don't make a comment, then 
forever hold your peace. Don't ever complain. Say everything 
that you need to say, pluses or minuses. Nothing is cast in 
stone until it becomes a law. And to me, even if it is a law 
and if it is bad, you should still change it.
    Mr. Lucas. Thank you. I yield back, Mr. Chairman.
    Chairman Meeks. The gentleman yields back his time.
    I now recognize the gentleman from Illinois, Mr. Foster, 
for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman.
    I think we really all agree that our goal is modernization 
and alignment with actual need on these, but we have to do that 
without formulas that will be gamed by the players in this so 
that you don't actually get the results you want.
    One of the things that concerns me is that many of the CRA-
qualifying activities are now going to be dollar-based. It 
seems to me this is going to encourage banks to make a small 
number of mega deals in things in areas that technically 
qualify. Whereas, if they got some credit for the number of 
activities as well as simply the dollar value, they would help 
a lot more smaller businesses, help a lot more individuals by 
providing them banking services. And I was wondering, Ms. Levi, 
Mr. Rodriguez, or anyone else, if you could comment on that?
    Ms. Levi. That is absolutely right. And banks will get a 
lot more partial credit for activities that are not targeted to 
LMI people and areas. So, the standard has shifted as well.
    Mr. Foster. I know. I was sort of surprised to learn that 
apparently, maybe even today, loans for stadiums and sports 
arenas' jumbotrons qualify for CRA credit. And this seems like 
the kind of mega deal, large thing that is not going to help a 
large number of people. And so some change in the formula that 
gives you credit for helping large numbers of businesses, not a 
large dollar volume.
    Ms. Levi. Yes. The formula and the primary purpose test has 
been jettisoned here, so it is both, but it absolutely quantity 
over quality, large over small, all the wrong incentives for 
CRA purposes.
    Mr. Foster. Mr. Rodriguez?
    Mr. Rodriguez. Yes. I would just add there is no test 
around the quality of the investments anymore. So it is 
watering down the investments and decreasing the potency. So, 
maybe we could have more CRA investments, but more of them will 
be worthless with respect to community reinvestment in the ways 
that the law intended and that we hoped to get to. These are 
the critical concerns with the proposal and the plan so far.
    Mr. Foster. So now we are left with just a geographical 
definition, rather than the purpose of the loan?
    Ms. Levi. Yes. We are left with a lot more activities that 
are not guided by the primary purpose of LMI and a lot more 
partial credit. So that does allow banks to run up the numbers. 
And the exam is designed under this proposal to make banks look 
as if they are doing more. But as Mr. Rodriguez said, it will 
have less impact on the communities and people the statute was 
enacted to serve.
    Mr. Foster. This clarity argument that Ms. Bautista has 
been making, do you see merit in having more clarity instead of 
having some human regulator saying, well, I think that 
qualifies or partially qualifies? Is it actually going to be 
more productive to have a very long list that is very specific 
versus a more general language that is just in the intent of 
what you are trying--
    Ms. Bautista. For the banks, you have to be specific, 
otherwise they will find excuses. And we need--
    Mr. Foster. So the banks make their own call under the 
current system as to what qualifies?
    Ms. Gonzalez-Brito. I think we want clarity and we do, like 
they did having more data, but we are not going to trade 
clarity and data for impact. And I think that is what this 
proposal does, it makes a trade for the core purpose of CRA, 
which is serving LMI communities to make it easier for banks to 
be able to get that outstanding rating. And so, it trades 
communities for Wall Street, basically.
    Ms. Levi. And Federal Reserve Governor Lael Brainard laid 
out some of their approach last week in its multiple metrics. 
So it is possible to achieve clarity for banks and communities 
without this dominant single metric that really incentivizes 
dollar volume.
    And if I can correct one assertion by the Congressman very 
quickly, this is a one-size-fits-all proposal, regardless of 
bank model, regardless of community needs. This is the 
definition of a one-size-fits-all proposal, and we are not the 
only ones that--
    Mr. Foster. Along those lines, just in the few moments I 
have here, I was sort of surprised that small businesses up to 
$2 million in revenue will qualify, but for some reason, if the 
business is a farm, it is $10 million. What is the reason for 
that? Why treat one business differently than another?
    Ms. Levi. Your guess it as good as ours, but I will tell 
you, on the farms, only 1 percent of farms had sales over $5 
million or more. About 76 percent of farms had sales of $50,000 
or less. So small farms are not the focus with that change 
there.
    Mr. Foster. Thank you. And I yield back.
    Chairman Meeks. I now recognize the gentleman from Florida, 
Mr. Posey, for 5 minutes.
    Mr. Posey. Thank you, Chairman Meeks and Ranking Member 
Luetkemeyer, for this hearing.
    The Community Reinvestment Act is heralded as one of the 
foundational civil rights acts of the last century. We all have 
an interest in a financial system that serves the needs of all, 
a system without bias. I strongly identify with that goal and 
believe that our goals of equality in the financial services as 
well as other objectives are best pursued by ensuring that our 
free market systems are efficient.
    Where financial institutions focus on their shareholders' 
bottom line, banks and other institutions can be expected to 
see the profit motive as inconsistent with an arbitrary 
exclusion of customers based on race or any other irrational 
criteria.
    Ms. Bautista, I would like to believe that fair-minded 
financial institutions would want to show off their activities 
that demonstrate their contributions to serving the needs of 
their depositors and assessment areas. Can you share your 
experience related to the attitudes of those who are evaluated 
under the CRA?
    Ms. Bautista. I was told not to say any specific bank, so 
bank A, bank B, bank C. You know, bank A, they make 
commitments, right? We are involved with so many settlements 
with all the banks. There is a lot of settlements. But after 5 
years, do we really see, did that move the needle? Did they 
increase homeownership in the African American, Latino, and 
Asian communities?
    The new CRA reform is so refreshing because there is 
accountability, there is transparency, and there is also now a 
pressure for banks to do the right thing and to increase their 
CRA. The CRA should not remain ``satisfactory.'' To me, they 
should all be ``outstanding.'' But a lot of them cannot be 
outstanding because they are missing just half a point or one 
point. And I ask them, why is that that you are not 
``outstanding?'' And it is hard for them to say why, because 
there are really no guidelines.
    Now, with this reform, they will now know, okay, my CEO, we 
are going to be ``outstanding'' and we are going to do a lot of 
planning. We are going to do investing. And what they are 
saying about the stadiums, I agree with that. We should have 
really thought it out. And now this project can be really be 
examined. Is this something that--it is easy to give loans to 
big hospitals, to stadiums, because they can do those loans all 
day long, because they have the right financial. But for us, 
like the CDFI, there are so many good CDFIs in there that are 
not getting investment because we are not savvy enough, because 
we are nonprofit. Even with Ms. Hope here in New York--and I 
sit on the advisory board--there are 1,100 CDFIs and they can 
do so much.
    Now, CDFI is another way to do more micro lending, to do 
more small businesses, to do more home loans to those who don't 
fit the box with the lenders.
    Mr. Posey. Okay. Does any substantial part of the community 
see CRA ratings as an opportunity to showcase how well they 
serve the needs of low- to moderate-income people?
    Ms. Bautista. Yes. CRA is a godsend. CRA is like God 
warning them do the right thing, so we have to make it right.
    Mr. Posey. Okay. Do many just see it merely as a regulatory 
burden?
    Ms. Bautista. Yes.
    Mr. Posey. Would you say 50/50, or what do you think?
    Ms. Bautista. It is too expensive for the small banks to 
comply with their CRA regulations. That is why I think all of 
the regulations are not good. And the unintended consequence of 
that is they will not do funding anymore to nonprofits. That is 
the job that we should all be doing, because they spent more on 
the regulations. That is why the big banks should not be 
treated the same way as the smaller banks. And community banks 
understand who they are serving. They know their borrowers.
    Mr. Posey. How do you think we can design a process that 
overcomes that?
    Ms. Bautista. You have to leave it to the OCC, the Federal 
Reserve, and the FDIC. They are the regulators. And I think 
with input from us, this is why this is great, the pluses and 
the minuses, and more information, we have until March 9th, and 
we are going to do a lot of town halls and we are going to be 
asking the REALTORS. We are going to be asking the loan 
officers. We are going to be asking the borrowers, the 
borrowers who are being denied, and they should not be denied 
from owning a small business or owning a home.
    Do you know that there is $100 billion of mortgage loans 
that are denied because they don't fit the box? I am a good 
borrower, but because of the foreclosure, my credit score did 
not go up for 5 years and I have been borrowing. I put 20 
percent down, I don't owe anybody, but my credit score is so 
artificial, it will not go up--it goes up and down; it depends 
on the time of the day.
    Mr. Posey. Thank you.
    Chairman Meeks. The gentleman's time has expired.
    The gentleman from Florida, Mr. Lawson, is now recognized 
for 5 minutes.
    Mr. Lawson. Thank you, Mr. Chairman. And witnesses, welcome 
to the committee.
    Today, we see that homeownership among African Americans 
and other minorities continues to fall behind. How do you see 
that the Comptroller of the Currency's, OCC's proposed changes 
in the Community Reinvestment Act (CRA) affects the 
homeownership of minority groups who suffer from these 
financial crisis? And I will just start with you, Ms. Levi.
    Ms. Levi. Let me contradict something that Ms. Bautista 
said here about CRA and the homeownership gaps and things like 
that. First of all, let's keep it in perspective, CRA covers 
about a third of the mortgage market. So, we do have to keep it 
in perspective. Second, 98 percent of banks are passing CRA 
exams today. It is really not a big problem for them.
    I will say this: The retail lending distribution test is 
pass-fail. There are some low bars but arbitrary thresholds 
around local demographics or peer comparators included in it. 
And overall, the CRA retail test used to be half of the exam. 
It is now, again, pass-fail, and you can fail in about half of 
your local assessment areas, your local communities, and still 
pass at the bank levels. And I think a lot of underserved 
communities, rural communities should be concerned about that 
in particular. As I said, I think it makes addressing the 
racial wealth gap that much harder.
    Mr. Lawson. Go ahead.
    Ms. Gonzalez-Brito. I also wanted to correct Ms. Bautista. 
When we do analysis of CRA data in California, the community 
banks and the smaller banks do better than the big banks in 
their CRA investments in lending in California.
    Mr. Lawson. Anyone else want to comment?
    Mr. Rodriguez. Can I add something?
    Mr. Lawson. Yes, go ahead.
    Mr. Rodriguez. Okay. I was going to add it is an excellent 
point. And just one fine point is that the homeownership rate 
of the Latino community nationwide is 4 percentage points lower 
today than it was a decade ago. If we put 4 million Latinos 
into homes today, we would just be catching up with where we 
were over a decade ago, and the reason is access to credit and 
affordability that is crucial to our communities to get back to 
where we were let alone. And CRA can be an important part of 
the solution if it is done right.
    Ms. Bautista. If I can just make a comment on the African-
American homeownership, I am so glad you mentioned that, 
because it is at an all-time low. We work a lot with Black 
pastors and we do a lot of workshops in the African-American 
community. We need to do a proper education, because for the 
African Americans, they don't even know sometimes if they can 
own a home. It is a different culture, so the financial 
literacy should be different in different cultures. And the 
African Americans need a lot of financial literacy, need a lot 
of down payment assistance, need a lot of extra help.
    Ms. Gonzalez-Brito. If I could just say, I think the 
problem is--
    Ms. Bautista. I am not finished yet.
    Ms. Gonzalez-Brito. --racism and systemic racism and not 
what Ms. Bautista is talking about right now.
    Mr. Lawson. I am trying to get some clarity. Ms. Bautista, 
can you finish?
    Ms. Bautista. Yes. Thank you so much. CRA is about the 
people. It is about the low- to moderate-income people. Let's 
focus on that. Let's do the right thing for all of us.
    And, let's not interrupt. At least, be decent.
    Thank you.
    Mr. Lawson. Ms. Levi?
    Ms. Levi. I just wanted to say on the financial literacy 
piece, there is also a shift under this proposal. This or CRA 
credit for financial literacy for everyone. Again, not targeted 
on low- and moderate-income home buyers and small businesses 
and others for whom the statute was designed. It just opens it 
up for everybody. And I think low- to moderate-income minority 
borrowers should be the focus of even that piece which Ms. 
Bautista mentioned.
    Mr. Lawson. Ms. Gonzalez, I have about 20 seconds, did you 
want to say something?
    Ms. Gonzalez-Brito. I just wanted to say that one of the 
things that this proposal does is that it makes it easier for 
banks to reach those ``satisfactory'' and ``outstanding'' 
ratings. It gives double credit for community development 
lending. And if I told my son that he could get double credit 
for doing half his homework, I will tell you right now he would 
do half his homework, and that is what we can expect from this 
proposal.
    Mr. Lawson. Okay, thank you. Mr. Chairman, I yield back.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentleman from Kentucky, Mr. Barr, for 
5 minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    I just have to take exception to that last comment. The 
community bankers that I know in central Kentucky, that is not 
their attitude. They want to help their communities. They don't 
want to do it halfheartedly. Every day, they go to work and 
they try to help the low- and moderate-income people of their 
communities, especially in rural areas. That is a 
mischaracterization of community bankers, in Kentucky at least, 
in my experience.
    Ms. Gonzalez-Brito. Congressman, it is community banking 
that we are--
    Mr. Barr. It is my time.
    Chairman Meeks. The time belongs to the gentleman.
    Mr. Barr. My time.
    I just wanted to make the comment that that is not the way 
the community bankers of my district behave. And I just wanted 
to say that.
    Ms. Gonzalez-Brito. And our data--
    Mr. Barr. It is my time. And I want to also correct another 
thing that was incorrectly stated. Ms. Levi made the statement 
that this is the Fed's position. I do recognize that Lael 
Brainard has a position on community--specifically for the 
community. But as I understand it, Ms. Brainard was speaking in 
her own capacity, not on behalf of the Fed. And the OCC has 
been working on this for about a decade, by the way. This is 
not fly by night.
    Let me ask one question to Ms. Knight. You were critical of 
the proposal to allow CRA credit for investment beyond a 
defined geographic assessment area. But you also stated that 
lack of physical branches--this is a very reasonable point that 
you made--obviously decreases access to banking services. This 
appears to be a bit of a contradiction. I will give you an 
opportunity to try to reconcile those statements. My question 
is, wouldn't allowing for investment beyond a defined 
geographic area into areas where there is no bank headquarters, 
where there are no branches, physical branches, but where the 
customers actually reside, wouldn't that actually have the 
effect of enlarging and enhancing the goals of CRA and helping 
the unbanked or underbanked have better access?
    Ms. Knight. Yes, I think both things can be true at the 
same time, because if you have banks that are not a physical 
location but have customers and they have to make a choice as 
to where to locate their branches, if they are able to make the 
choice, they may not make it in low- to moderate-income areas 
because those areas are not the most profitable to the banks.
    Mr. Barr. My point is the OCC proposal contemplates going 
beyond an arbitrary geographic area to actually where the 
customers are. And I think that actually is an enhancement.
    Let me ask a question about rural communities to Ms. Levi, 
and I will let you answer this question. A recent Federal 
Reserve study shows that--because you talked a lot about farms 
and you talked a lot about rural communities, underserved 
communities, which is very much my district. A recent Fed study 
showed that 51 percent of the 3,114 counties in the U.S. saw 
net declines in the number of bank branches between 2012 and 
2017. These declining bank branches disproportionately hit 
rural communities. A total of 794 rural counties lost a 
combined 1,553 bank branches over a 5-year period. That is a 14 
percent decline.
    The negative financial impacts on rural counties of branch 
closures are perpetuated by the continuing difficulties due to 
burdensome regulations and other roadblocks of de novo 
community bank formation. While these trends leave residents of 
rural counties without access to much-needed financial 
services, they also have a negative downstream impact on 
communities because of the absence of incentives under the CRA 
for banks to invest.
    The CRA obviously needs to reach more rural communities, 
commonly referred to as CRA deserts. Do you believe that the 
CRA framework that we have today properly accounts for these 
rural communities?
    Ms. Levi. No, it doesn't. And the NCRC is--first of all, 
let me say this: Community banks are absolutely vital to their 
communities. We work with a lot of them. Okay? We are not here 
to impugn community banks. But let me--
    Mr. Barr. I'm sorry. I was just speaking of Ms. Gonzalez' 
statement, that is all I was doing.
    Ms. Levi. This is why NCRC spends so much time organizing 
around bank mergers and acquisitions, because they lead to a 
lot of bank branch losses and the loss of small business 
lending. All of that is very well-documented in the research. 
CRA is focused on--
    Mr. Barr. I understand. And we have some common ground 
here, and I acknowledge that, I and appreciate that statement. 
My only point is that the OCC proposal appears to do better in 
terms of accessing rural communities. And I think we ought to 
look at the good here as well and keep the good in this OCC 
proposal to the extent that it gets banks access into some of 
these rural communities that are currently underserved. I only 
have--
    Ms. Gonzalez-Brito. I can answer that question around--
    Mr. Barr. I don't have a lot of time left. Unfortunately, 
my time has expired.
    Ms. Gonzalez-Brito. I can answer the question around rural 
communities.
    Chairman Meeks. The gentleman's time has expired.
    Mr. Barr. Okay. I'm sorry we don't have more time. Maybe we 
can talk offline. But I appreciate your time today and your 
testimony, and I yield back.
    Chairman Meeks. The gentlewoman from Massachusetts, Ms. 
Pressley, is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Chairman Meeks, for your continued 
leadership on this issue.
    It is odd but consistent that this Administration's 
modernization efforts betray the fundamental mission of what 
they hope to modernize. The Community Reinvestment Act is no 
exception.
    Over the weekend, The New York Times published an editorial 
highlighting the many problematic elements of the FDIC and 
OCC's December proposal. Under this proposal, loans for 
improvements to stadiums that, ``happen to sit in poor 
neighborhoods'' could earn banks CRA credit. Compare that to 
the values and data-driven approach outlined by Governor 
Brainard. The Federal Reserve has notably withheld its support.
    Now, although this was a consistent through-line in all of 
your testimonies, I do believe it bears underscoring. So for 
the record, and this is to everyone on the panel, by a show of 
hands, how many of today's witnesses support the FDIC-OCC 
proposed rule?
    How many support the Federal Reserve's approach 
prioritizing keeping branches open, small-dollar loans, and 
impactful community investment? Again, by a show of hands.
    Ms. Levi. It is a better start.
    Ms. Pressley. This past weekend, I was fortunate enough to 
host the very first historic Congressional Black Caucus fly-in 
in my district, the Massachusetts Seventh. Now, during the 
economic justice panel, including community leaders, 
entrepreneurs, and industry representatives, we discussed the 
many challenges our communities face when it comes to access to 
capital. One of the more compelling stories was that of a 
company founded and owned by a Black woman. The company is 
called TRILLFIT. Her name is Heather White. And she was unable 
to access capital; instead, she liquidated her entire 401(k) in 
order to open a business.
    Women, Black women particularly, struggle to secure 
financing for everything from a business to a home. Earlier 
this year, when the big bank CEOs testified in front of this 
committee, I questioned the witnesses about this disparity in 
lending, which one report smartly labeled as, ``pink lining.'' 
The report found that women were 30 to 46 percent more likely 
to receive subprime mortgage loans during the financial crisis 
than men. Black women were 256 percent more likely to receive 
subprime loans than white men.
    How does this proposal ensure that Black and Brown women 
will not continue to be targeted, if not be more likely to be 
targeted with these predatory financial products?
    Ms. Levi. First of all, quality, a lot of the qualitative 
factors that are currently a part of the exam are out of this 
proposal. This is a dollar volume-driven approach that 
contravenes quality.
    And furthermore, I would say to the gentleman about rural 
areas, you can't allow banks to fail in over half of their 
local communities and still pass an exam at the bank level.
    Ms. Gonzalez-Brito. I would also say that the OCC's 
discrimination guidelines in terms of the way that they 
evaluate discrimination as part of their CRA exams are weaker 
than the Federal Reserve and the FDIC. They had an opportunity 
to strengthen that as part of this proposal and downgrade for 
harm that is caused by discrimination, and they did not do that 
as part of this proposal.
    Ms. Pressley. Thank you.
    Now, Mr. Rodriguez, how is the CRA building upon that 
influence of development and delivery of financial products for 
communities of color more broadly?
    Mr. Rodriguez. That is an excellent question. I would just 
add to the previous answer, it is a great point and it is a 
factor in how the markets are changing and the needs of the 
community are changing. Someone earlier, a Congressman, 
mentioned meritocracy. The very reason why we have CRAs is 
because credit wasn't divvied out based on merit; it was based 
on race and ethnicity, and the country has changed now. And we 
want this to adapt and modernize to the changing country.
    The Latino community in rural communities has doubled in 
years and is a fast-growing population. When we are talking 
about rural communities, are we thinking about Latinos in rural 
communities? Are we thinking about women? I think those are 
important points to raise and add to this conversation.
    Ms. Pressley. And, Mr. Rodriguez, with the remaining 
balance of my time, what happens when CRA-covered banks exit 
neighborhoods or close branches?
    Mr. Rodriguez. Another excellent question. Look, I grew up 
in Red Hook, Brooklyn. When I grew up, I had no banks in my 
community. There was one on the outskirts of my neighborhood 
because the Battery Tunnel was there, so when people needed to 
get some money for tolls, there was a bank there for them. 
There were not people who looked like me and you in those 
communities who had access to banking. And we paid a price for 
that over time, and it is a legacy that we are paying for even 
now as we look at disparities in wealth and disparities in 
access to credit and equality.
    Thank you.
    Chairman Meeks. The gentlelady's time has expired.
    I now recognize the gentleman from Colorado, Mr. Tipton, 
for 5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman. I appreciate you 
holding this hearing.
    A lot of continuity of thought in terms of CRA needs to be 
addressed. I happen to come from rural America, and when we are 
talking about community banks, my community banks in my 
district actually care about the people they live with, because 
they live there. They are trying to be able to actually see job 
improvement, to be able to help support that local community. 
And so when it comes to our rural community banks, I think for 
the most part, they are doing a good job reinvesting back into 
those communities.
    That being said, we need to be able to re-update the CRA. 
The last time this was looked at was under President Clinton. 
And think about that. We have had a variety of changes. No one 
has actually brought up the idea of, we have lending now going 
on in communities from somebody that doesn't have any physical 
presence. They can be out of Brooklyn and make a loan into 
southwest Colorado. No CRA involvement whatsoever investing 
back into that community. So is it going to be appropriate for 
us to take the time to be able to actually address it? I think 
it is.
    I do think it is worthy of note that the OCC and the FDIC 
actually were dealing with the Fed data in terms of coming up 
with this. And we ought to all be mindful that this is a 
proposal, a rulemaking proposal. So, the feedback is obviously 
important for us to be able to address.
    Ms. Bautista, you have stated a number of times that you 
regularly worked in terms of some of the ideas that are coming 
up, and you had cited that we have 200 clarifying proposals 
that will qualify as CRA. It is my understanding, and can you 
maybe speak to this as well--one of the frustrations I had 
heard from community bankers is they are doing what they view 
as CRA equivalents but never getting credit for it. Do they 
have an opportunity under the proposal from the OCC and the 
FDIC to be able to submit that for consideration as a CRA 
activity?
    Ms. Bautista. Yes, absolutely. This is why I said there is 
going to be over $100 billion of increase on CRA because there 
is now clarity. And as a community organizer, I have been dong 
this since 2002, I have been fighting--not fighting, trying to 
work with the banks to ensure investment in the low- to 
moderate-income, to the CDFI, to the CDEs, to the faith-based 
organizations.
    For example, faith-based organizations--during the 
foreclosure crisis, the people go to their pastors. Even though 
pastors don't know much about banking foreclosure, they went 
out of their way. First, AME Church in Orange County, we worked 
with that pastor, Mark Whitlock. And faith-based, the Hispanic 
evangelical church, the same thing. We are doing a lot of 
workshops now. So now, that is not CRA-related because it is 
faith-based.
    Arts and culture. One of our members is doing 100 percent 
service to the low-income Latinos. And every time she goes to 
the banks, they always say, oh, this is not CRA-related. But if 
you don't educate the people at a young age, it is not just 
owning a home, it is not just owning a business, it is also job 
creation.
    Like I said, I have seen borrowers denied over and over 
again, home buyers denied, even though I know they can afford 
to buy a home, with different cultures. Now with our family, 
the Filipino family, there are so many of us living in one 
house. And all of the loans put together can now be qualified.
    There is another example. A client of ours is trying to 
refinance, because the interest is so high, but because his 
wife had cancer, he had to take care of his wife. So he was out 
of a job for 2 years, and he cannot get a loan approval because 
of loss of that employment. So I told the lender, I said, it is 
not right, he only did it for the right thing, and he never--he 
always had a job, and the mother is putting in now to help.
    So now there is a lot more clarity that knowing your 
borrower and the CRA officer now--and CRA officers, most of 
them are good, because they understand the borrower. And the 
community banks, I so agree with you; in California, they are 
good.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentlewoman from Michigan, Ms. Tlaib, 
for 5 minutes.
    Ms. Tlaib. Thank you all so much for being here. I think 
the Community Reinvestment Act--for so many folks in the 13th 
Congressional District that I represent in the City of Detroit, 
one of the most beautiful, Blackest cities in the country, 
where I think we were the forefront and kind of the birthplace 
of this incredible civil rights movement that I think continues 
on through this generation.
    I do want to back up, and I think, Ms. Levi, maybe you can 
help me. I really want to back up and talk about the 
foundation, the reason that CRA even existed or was created.
    Ms. Levi. It was created to really correct for a lot of 
disinvestment that resulted from government policies, racial 
discrimination and all of that. Evidence of those redlining 
policies is still on the ground today. And discrimination is 
ongoing. We have plenty of evidence for that. But it was also 
designed to correct for market failures.
    Ms. Tlaib. That is right. Ms. Levi, talk about that, 
because it is recorded in history that these banks redlined.
    Ms. Levi. They redlined. And after redlining perhaps was 
prohibited, these markets still suffer from a lot of market 
failures, egative and informational externalities that make 
them difficult to serve, how to value the property. There are a 
lot of credit--profitable institutions there, but if they are 
thinly traded and they don't have the information, then it 
makes banks misperceive the risk that they will face by lending 
and investing there.
    Ms. Tlaib. I think you are much, much kinder. I just know 
at home and on the ground it is very intentional, because you 
see now the CRA changes being done by the same people who 
probably didn't want CRA created in the first place.
    Ms. Levi. Absolutely.
    Ms. Tlaib. We can call it market failure, which is I think 
is a fancy way to say, no, this is intentionally trying to go 
toward communities and populations that, in some ways, are much 
wealthier and look different than the communities that I 
represent.
    Ms. Levi. Flat out discrimination is very much with us.
    Ms. Tlaib. Oh, it is very core. And sometimes, I feel like 
we should just go ahead and look at all the lawsuits that have 
settled, where actual whistleblowers within these banks, many 
of whom in California, for instance, were told, if somebody 
comes in with an accent, then make sure you give an interest 
rate that is higher. This is actually documented. That is 
happening right now in this century.
    So one of the things I think is also critically important 
is, say I am a bank now--because one of the things that is 
happening in Detroit, specifically, is we have had Comerica 
Bank and Huntington Bank in Detroit close several branches 
already throughout 2016 and only--like in 2016 by Comerica 
Bank. One of the things I want to know is, if I am a bank now 
and I need to need to meet CRA, what are some of the just basic 
minimums under this new rule do I have to meet?
    Ms. Levi. First of all, I would say this: In Detroit, and 
in a lot of rural communities, for example, there is a lot of 
demand for small mortgages, small dollars, small business 
loans, small stuff. And this proposal would incent the big 
stuff. And so, those qualitative factors around small things 
aren't strengthened here; they are weakened. Again, the retail 
lending test is going from half to far less. So, the incentives 
in the proposal are off.
    Ms. Tlaib. Okay. One of the things I wanted to ask Ms. 
Gonzalez-Brito is, what impact, I think not only in 
homeownership but other kind of economic opportunity impacts 
for communities of color, and one of the things I do want to 
get to is, is it true that the number of homeowners among 
communities of color is actually less than before the CRA at 
this point, that the numbers--again, I--we used to have the 
largest statistic for homeownership, I think it was up to 70 
percent in Detroit. It is where we built up the middle class. 
It was incredible. And now, it has just dropped significantly.
    Can you talk about that, the systematic change? Because I 
think it is all interconnected with everything else that we try 
to fund. From transportation, from other kinds of school 
programs, all these things are so interconnected with 
homeownership.
    Ms. Gonzalez-Brito. I think that has a lot to do with what 
you were talking about in term of systemic racism. We saw in 
the subprime mortgage crisis that banks were targeting African 
Americans and immigrants for these loans that were targeted to 
us because of systemic racism. I think CRA plays an important 
role in homeownership for low-income people. And, 
unfortunately, the way that this proposal is written, it will 
lessen the amount of homeownership in our communities instead 
of helping.
    Ms. Tlaib. Thank you, Mr. Chairman.
    Chairman Meeks. The gentlelady's time has expired.
    I now recognize the gentleman from Texas, Mr. Williams, for 
5 minutes.
    Mr. Williams. Thank you, Mr. Chairman.
    I am a small business owner from Texas. I have been in 
business for 50 years. I can't help but think as we have this 
conversation, I remember, in 1976, I was actually on a board. I 
was actually on a community bank board, and we were having all 
the dialogue of, how are we going to make this work, and here 
we are still having the dialogue, and I think that is probably 
healthy.
    I asked a community bank in my district--a pillar of the 
community, who does everything they can to make the community 
better--what is the biggest issue with the current CRA regime, 
and they said the lack of transparency within the system. For 
example, their bank will engage in a transaction of a local 
group thinking it will meet the investment test, only to be 
told it does not qualify. Additionally, regulators will not 
give banks preclearance for new activities, which prevents them 
from innovating and experimenting with new activities that are 
better suited to meeting the standards of low- and moderate-
income people. Let their mind wander. Let them have a chance to 
invent things.
    So, Ms. Bautista, can you discuss how this new proposal, 
and we have touched on this a little bit, will add additional 
activities that banks can experiment with in order to help 
communities in innovative ways?
    Ms. Bautista. Like I said, CRA officers want to do the 
right thing because that is what they are hired for. Sometimes, 
the CEO or the executive does not have the passion in helping 
the community. So, that is where I see the difference from the 
top to bottom. But if the CEOs recognize, and now that they 
have to be examined, they are now going to be--make sure that 
they are accountable for this, there is going to be more 
pressure for them to do the right thing.
    And I agree with a lot of things for the African Americans, 
for the women, that is more lack of access to capital. So with 
this CRA reform, with so much clarity, when in the last 25 
years, and I cannot imagine there was no clarity. And I really 
have to thank Comptroller Auten and Yolanda McWilliams, the 
people who are doing this, because they are finally sticking 
their necks out. So, we have to give credit when it is due.
    Mr. Williams. There are a lot of good ideas out there. We 
need to let them grow.
    Ms. Levi. Can I add something?
    Mr. Williams. No, I have limited time here.
    I have heard from the bankers in my district that CRA 
deserts and rural communities present unique challenges for 
their branches. Ms. Bautista, on page 3 of your testimony, you 
talk about the disparity in banking options between Compton and 
Santa Monica in California. And even though Compton, 
California, and Lampasas, Texas--that is in my district--are 
polar opposites, I am curious if the problems that both 
localities face regarding CRA are similar?
    Do you believe that this new CRA proposal is flexible 
enough to serve the unique challenges in both rural and urban 
areas?
    Ms. Bautista. Absolutely. This is why I also have to thank 
the tours that the Comptroller has done, because he went to 
Compton, and a lot of the NDC members were there, a lot of the 
pastors, and the CDFI. And he recognized that there has to be a 
lot of help in Compton. It is even hard to buy a home in 
Compton. And it is the same population between Compton and 
Santa Monica, and yet there are more branches in Santa Monica.
    So with the CRA reform, I am so happy that our members in 
Compton, and I talk to them a lot, that there is now going to 
be at least hope for them to own a home, a small business, and 
then have a job.
    Mr. Williams. Come to Lampasas, Texas, one day. You are 
invited, okay?
    Ms. Bautista. Okay.
    Mr. Williams. The business of banking has changed 
drastically since the last time the CRA was updated, and it 
seems like these regulations are long overdue for 
modernization. In reviewing this proposal, it seems like it 
would provide more support to America's small business, of 
which I am one, and small farms, which are the primary source 
of jobs in America and create economic opportunity in 
underserved areas.
    So my question to you, Ms. Knight is, can you tell me 
specifically what you think is wrong with allowing more support 
for these types of activities?
    Ms. Knight. We will talk specifically about some of the 
activity that would be counted for credit for CRA in this 
proposal. Any activity in a low- to moderate-income Opportunity 
Zone would count, so that would be luxury housing, self-storage 
facilities, and stadiums, as was mentioned earlier. Those 
activities don't necessarily provide the kinds of support and 
services that low-income communities are looking for.
    Mr. Williams. Okay. With the advent of online and mobile 
banking, I tend to agree the current assessment area criteria 
is outdated. As the business of banking becomes more mobile, we 
should update our regulation to better reflect the reality.
    Ms. Bautista, in light--
    Chairman Meeks. The gentleman's time has expired.
    Mr. Williams. My time is up. I yield back.
    Chairman Meeks. The gentlewoman from Virginia, Ms. Wexton, 
is recognized for 5 minutes.
    Ms. Wexton. Thank you, Mr. Chairman. And thank you to the 
witnesses for coming to testify before us today.
    As has been noted, the OCC's proposed rule focuses more on 
the dollar amount and the quantity of transactions and loans 
than on the quality of those loans. And in an op-ed that ran 
over the weekend, The New York Times editorial board used the 
example of a bank financing a new sound system at M&T Stadium 
in Baltimore, and then claiming CRA credit for investing in the 
community. And they could do that under this new proposal.
    Is this type of lending consistent with the original 
purpose of the CRA, which was to ensure that people in LMI 
communities have equal and affordable access to banking 
systems? So how does this kind of lending, this particular 
instance of lending, how would that benefit people in LMI 
communities, particularly those in the area around the stadium 
in Baltimore? Ms. Bautista?
    Ms. Bautista. Thank you for asking that. People are 
reacting to the fact that now there is a proposed list that we 
can--
    Ms. Wexton. I'm sorry. I asked a very specific question. 
How would that particular project benefit or how would it help 
the people in the area of Baltimore around that stadium access 
more credit and fair and equal access to credit?
    Ms. Bautista. We need to make sure that the projects don't 
take advantage of the most vulnerable. So, it has to be really 
thought out.
    Ms. Wexton. So would the financing of a new sound system at 
a stadium help people in the community--
    Ms. Bautista. So it always--
    Ms. Wexton. --get more access to credit?
    Ms. Bautista. It always depends, right? I am always about 
job creation. I want to make sure that when--because if there 
is a job, there will be homeownership. And if you create more 
businesses--
    Ms. Wexton. So you can't draw a straight line from that. It 
would be through--if the people in that community got a job 
putting that new sound system in the stadium, then they might 
be able to afford to borrow money. Is that what you are saying?
    Ms. Bautista. You really have to think it through. Like I 
said, it is not one-size-fits-all. If--
    Ms. Wexton. Thank you very much.
    Ms. Levi, can you explain to me how such a project would 
benefit the people in the community?
    Ms. Levi. If you want a short answer and a straight line, 
it wouldn't. It is not the type of lending or investing that 
CRA was designed to do. You don't need CRA to get that done. 
Okay? So it just wasn't what CRA was designed to do.
    Ms. Wexton. Last week, we heard some testimony that the OCC 
and the FDIC and the Fed are not all on the same page about 
this proposed rule. And last week, Governor Lael Brainard from 
the Federal Reserve unveiled an alternative approach that would 
be kind of more focused on a results-oriented sort of an 
assessment. And the Fed oversees about 15 percent of CRA 
activities.
    If these three regulators do not end up on the same page, 
what are some problems that lenders could face with this 
uncertainty?
    Ms. Levi. Forum shopping in their charters, but also, just 
on the data, the analyses and the modeling. It is a preferable 
start. But in its 40-year history, the regulators have 
implemented this law really in coordination, and this proposal 
right here has fractured the consensus. But I think forum 
shopping is one in terms of charters and things like that could 
be a downside, among other things.
    Ms. Wexton. Can you opine as to the advisability of the OCC 
and the FDIC moving forward on this new proposal without the 
Fed being on board?
    Ms. Levi. I would say both on the advocacy side for 
communities, and I have heard lots of bankers say the same 
thing. They really want the regulators to be on the same page. 
But, and this is key, not behind this proposal. A better 
approach is where consensus should be built.
    Ms. Wexton. Very good. Thank you very much. And I will 
yield back the remainder of my time.
    Chairman Meeks. The gentlelady yields back the balance of 
her time.
    The gentleman from Georgia, Mr. Loudermilk, is now 
recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman. And I thank you 
all for being here.
    I just want to make sure we do clarify something, before I 
get into my questions, that Ms. Brainard was speaking on her 
own behalf, not on behalf of the Fed. So, let's make sure that 
is clear.
    It is important that we have this hearing because, as has 
been stated several times, it has been a long, long time since 
the CRA has been updated. Much has changed in that time period, 
from technology, to our culture, to the diversity. And it is 
extremely important that, as we continue on, we make sure that 
CRA is being invested in areas that really matter.
    I represent rural communities as well as metropolitan 
areas. And as has been spoken to earlier, the small banks are 
the ones who really are in the position to have and the desire 
to have the greatest impact and invest in these communities. 
This is a very complex issue. And what I am afraid of is, since 
I have been here in the City, there is a lot of resistance to 
change, especially before we even give it an opportunity to 
move forward, and this is something that is extremely complex. 
And I think if you hold it in the light of yesterday versus 
into today, and I think that is what we are doing, is we are 
comparing an old regulatory scheme in the light of today and it 
causes problems, so we are looking at ways to update it.
    As I talk to the banks back home, those that are in our 
communities, one of the biggest flaws that is expressed to me 
is, under the current CRA regime, it takes regulators years 
sometimes to deliver CRA exam results to a bank. That deprives 
low- and moderate-income communities of a lot of CRA activity.
    So, Ms. Bautista, will the proposed rule make CRA exam 
results more timely by making the CRA more objective?
    Ms. Bautista. Yes. The answer is yes. And going back to 
minority banks, if the minority banks are really helping the 
borrowers on the ground, we should also encourage the big banks 
to invest in minority banks so they can do more work. So with 
the clarity now, the minority banks--even the commercial banks 
can do a lot more. They can plan exactly what they will be 
planning in the next year or 2 years.
    And then my encouragement is keep opening this discussion. 
Find out from different people what they really need. And we 
should really ask the low- to moderate-income people, the 
people of color, English as a second language, do they even 
know about CRA? Most of them do not know about CRA. They don't 
even know what the Community Reinvestment Act. So, I have to go 
out there and explain it to them. When I went to Southeast 
Asian business organizations, I asked them, can you raise your 
hand if you know about CRA? They don't know. So, I was able to 
explain it to them.
    So the more community organizers doing this, the more we 
can deliver results. And the more we work together and we are 
encouraging the Federal Reserve--and I know this is not just 
Lael Brainard. There are a lot of Governors there who also have 
to weigh in, not just one person. And a lot of the people who 
are working for the Governors, the Eric Belskys of the world, 
the gravitas, they all care so much about this. So let's give 
them a chance to iron out what is good. But somehow, you have 
to do it. Like Nike's slogan, just do it.
    Mr. Loudermilk. And what I get back from a lot of these 
banks is, under the current CRA, it is almost like filling a 
box to get a credit versus the transparency and the clarity of 
knowing where you can invest. And I think that is extremely 
important.
    Another aspect of this that needs to be modernized is, we 
live in an area of technology, working with different banks, 
smaller banks especially. There are more and more people, 
including those in low-income areas, who are relying more on 
technology for banking, especially the underbanked and unbanked 
who are using these devices. Is there anything in this 
rulemaking that will allow banks to expand their CRA activities 
into areas where they can use the fintech platforms to collect 
deposits?
    Ms. Bautista. Yes. This is another thing that I like, if it 
is a bank that does not have a branch presence, but they have 5 
percent deposit, they have now to do some CRA. Right now, they 
are excused. They are exempted from CRA. Not anymore. If you 
take deposits from my world, my local community, you better 
invest in my community.
    Mr. Loudermilk. Thank you. I am out of time.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the gentlewoman from New York, Ms. 
Velazquez, for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Rodriguez, it's wonderful to see you again.
    Mr. Rodriguez. Likewise. Thank you.
    Ms. Velazquez. As you know, the CRA was passed by Congress 
in 1977 in response to redlining and to ensure banks meet the 
credit and capital needs of all the communities they serve. Can 
you describe the impact the CRA has had on Latino communities?
    Mr. Rodriguez. Yes. Thank you for the question. There is a 
lot of really good information and data that is coming out that 
shows significant increases in CRA investments in Latino, 
African American, and other communities that have been 
historically discriminated against that we have for ourselves.
    Ms. Velazquez. And do you believe this community will still 
benefit from the CRA's principles and its core mission?
    Mr. Rodriguez. Absolutely. The one thing that hasn't 
changed in all these years is that we still have significant 
disparities in financial and economic indicators by race and 
ethnicity for communities that need to be addressed, and CRA 
can be an important part or continue to be an important part of 
that solution.
    Ms. Velazquez. Ms. Levi, I believe that you will agree with 
the assessment.
    Ms. Levi. Absolutely, and so would the Federal Reserve of 
Philadelphia, Richmond, and many other public and private 
researchers that have documented it.
    Ms. Velazquez. Thank you.
    Mr. Rodriguez, in 2018, the Association for Neighborhood & 
Housing Development found that in low-income census tracts in 
New York City, the number of bank branches was down 7 percent 
since 2017. I am concerned about how these trends will impact 
my constituents' access to affordable credit and financial 
services. How important are bank branches to LMI communities, 
especially Latinos?
    Mr. Rodriguez. We continue to believe that it is enormously 
important. Our research shows 7 in 10 Latinos still use bank 
branches. It is an important source of wraparound credit. And I 
would just add for those Members of Congress who have rural 
communities, rural America has lost half of its bank branches 
in the last 2 decades. If they want rural communities to look 
like Red Hook, Brooklyn, 30 years ago, they will allow this 
rule to continue without the Fed's involvement.
    Ms. Gonzalez-Brito. Congresswoman, can I add something to 
that?
    Ms. Velazquez. Yes.
    Ms. Gonzalez-Brito. This proposal actually eliminates the 
service test and would make it so that banks receive almost no 
credit for branches in LMI communities. So, it would really do 
a lot of damage for what Mr. Rodriguez is talking about, the 
need for branches in communities that are LMI, Latino 
communities as well, and African-American communities and other 
communities of color.
    Ms. Velazquez. Thank you.
    And as banks place greater emphasis on their online 
platforms and apps or choose to become branchless altogether, 
how should we think about the importance of branch banking in 
terms of CRA? Ms. Levi?
    Ms. Levi. It continues to be critical, and the elements of 
this proposal that attempt to reach that, the new deposit-based 
assessment areas, again, it is not clear in the proposal how 
many credit deserts they are going to cover. It simply is not 
there.
    And Ms. Bautista is missing one key. You actually have to 
collect more than 50 percent of your deposits outside of your 
branch network before any new assessment areas have to meet the 
5 percent market threshold that she mentioned. So, that is a 
very high hurdle. And again, how many credit deserts, how many 
credit hot spots are we going to see new assessment areas in?
    Ms. Velazquez. Thank you.
    In her remarks regarding CRA reform at the Urban Institute 
last week, Governor Brainard stated it is much more important 
to get the reform right than to do it quickly. So by a show of 
hands, how many of you agree with this statement?
    And by a show of hands, how many of you are concerned that 
the OCC and the FDIC may be trying to rush the rule towards 
finalization and are not providing sufficient time for public 
comment?
    So, Ms. Bautista, you think that we don't need more time 
for people to provide input?
    Ms. Bautista. Congresswoman, like I said, it is 25-years-
old. They have 10 years of that data. The last 2 years, they 
were diligently working on this. And you can relate to this 
because being women, being minority, our people need help now. 
They need jobs. They need to have capital for their small 
businesses. They need affordable housing. They need all of 
that. If I'm going to wait, I am not giving justice to the 
people I serve. They are smart enough, right. This is why input 
from all of us here is fantastic.
    Ms. Velazquez. Thank you.
    Ms. Bautista. Put everything together.
    Ms. Velazquez. Thank you.
    Mr. Rodriguez--
    Chairman Meeks. The gentlewoman's woman time has expired.
    Ms. Velazquez. Thank you. I yield back.
    Chairman Meeks. I now recognize the gentleman from 
Virginia, Mr. Riggleman, for 5 minutes.
    Mr. Riggleman. Thank you, Mr. Chairman.
    I want to start by saying I support the mission of the CRA 
to encourage depository institutions to help meet the credit 
needs of the communities in which they operate, including low- 
and moderate-income neighborhoods, and I applaud the OCC and 
FDIC's effort to bring the CRA into the 21st Century. And I 
also believe we need to make the CRA work better for everyone 
and encourage more lending, investment, and services in the 
areas that need it most.
    And for Ms. Bautista, one more time just to clarify, why 
would this actual proposal help with any type of transparence 
and timely reporting?
    Ms. Bautista. Looking at all the 200 pages or so, I found 
10 benefits to citizens and community members, which we wrote 
down: 10 benefits to community development practitioners, 
advocates, small farms, and small businesses. We have spoken to 
community leaders, to the pastors, to the borrowers, to the 
homeowners. We all know the problems. We are not going to hide 
that we don't know the problems. We all agree, whatever side of 
the aisle you are on, that we are all the same. CRA is 
nonpartisan. CRA is about helping people. And if we truly need 
to help people, we have to do it now.
    Mr. Riggleman. The reason I am asking that question is, you 
talked about small farms and small businesses, and for the 
whole panel, 65 percent of the population of my district 
resides in rural areas. It is over 10,000 square miles. And for 
the East Coast, that is a pretty big district. That is bigger 
than New Jersey. So, I go all the way from the suburbs of D.C. 
here all the way to the North Carolina border.
    As far as I am concerned, any modernization to the CRA has 
to address the unique challenges that I have, especially in 
underserved rural communities, especially with accessing 
credit.
    So one more, Ms. Bautista. How do you think the CRA 
proposal to increase the size of loans that qualify as small 
farm loans in LMI areas will impact lending in rural areas?
    Ms. Bautista. We have one member, Martha Montoya, all of 
her life is serving the farms, and, oh, she is so excited now. 
In this proposal, when she saw the words, ``small farms, family 
farms,'' she was so excited. So I told her, come to the 
workshops, come to the town halls so they can be heard, and she 
said, ``Faith, as much as they want to, they are so busy and 
they cannot go to San Francisco, they cannot go to L.A., they 
cannot go to D.C..'' So my message to her is, tell them help is 
coming.
    Mr. Riggleman. Thank you.
    Ms. Levi. Can I add something?
    Mr. Riggleman. Yes, ma'am. Please.
    Ms. Levi. Okay.
    Mr. Riggleman. Actually, you were next on the questions, so 
this is perfect. Thank you.
    Ms. Levi. I think you are raising some very important 
concerns, and there has been a lot of talk in the committee 
room about all these new areas where you can get CRA credit. 
But I want you to understand that it is the CRA obligation, not 
just where you can get the credit, that drives a lot of bank 
behavior, that banks will actually be examined in an area to 
look at the kind of lending to small businesses and things like 
that that they are doing.
    So the obligation drives a lot of bank behavior, not--so a 
proposal that lets them sort of hopscotch around the nation and 
cherry pick the most profitable lending and investment 
opportunities, again, it is not going to incent what we need to 
incent in terms of lending and investing in the most difficult 
areas.
    Mr. Riggleman. So in that sense, because if I--just to 
let--and everybody on the panel probably knows this. If I am 
going down to--if I say CRA to any one of the small farmers or 
businesses in my district, even those who are underserved, they 
don't even know what I am talking about, right? And I almost 
believe there needs to be some kind of marketing program, but 
that is probably another hearing, as we go through with what 
CRA can actually do, as we go forward.
    Ms. Levi, you were there. That is great, because I had 
another question for you. But I do think everyone on the panel 
would agree that a regulatory structure that is clear, 
consistent, and works for all impacted parties, including the 
lenders, is a good thing. And if you want to incentivize 
financial institutions of all sizes to comply with laws and 
regulations, I think it is incumbent on the government to 
ensure equal and tailored treatment. I would say this, and I 
wrote something else down, but isn't fair treatment the 
rationale for the Community Reinvestment Act? And for people 
like me who, brand new to the Financial Services Committee 
after a year, who ran multiple small companies, that is 
something that I want to make sure that we push towards.
    So, here is the thing. And, Ms. Levi, you can expand on 
this. Thank you for chiming in. What do you think the best way 
is to hold banks with vastly different sizes and business 
models to the same community development standards? When you 
are talking about incenting these banks, how do you hold them 
to the same standards based on their different sizes and also 
the business models?
    Ms. Levi. Again, I think this proposal does have a one-
size-fits-all. It isn't tailored to banks with different 
business models, the ebbs and flows of the economic cycle and 
things like that. It is just really one standard for everybody.
    Chairman Meeks. The gentleman's time has expired.
    Mr. Riggleman. Thank you.
    Chairman Meeks. I now recognize the gentleman from 
Illinois, Mr. Garcia, for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman. And thanks 
to all of the panelists who have shared their expertise and 
wisdom with us today.
    I must confess, I am moved by four-fifths of the panel with 
many of the concerns that you have clearly articulated and 
warned us about if this proposed CRA rule is approved.
    In 2018, in a post outlining principles for CRA reform, 
NCRC wrote, ``Currently, the only penalty for failed CRA 
ratings is the possibility of denial of merger or branch 
applications. This is one of the few sticks things that 
motivates banks to pass their CRA exams.''
    That is the leverage, right? Still, we have seen many 
examples of mergers getting waved through between banks with 
poor records of lending in low-income communities.
    Ms. Gonzalez-Brito, you have some experience advocating 
that a bank with a problematic CRA record not be allowed to 
merge. In your testimony, you describe Mr. Otting's bank, 
OneWest, as, ``among the worst banks at reinvesting in low- to 
moderate-income communities.'' You outlined OneWest's 
discriminatory lending record, the high number of complaints 
filed against it with the CFPB, and its abysmal record of 
supporting affordable rental housing development and lending to 
small businesses.
    In your view, why was a bank with such a poor CRA record 
allowed to merge with CIT? And why did the OCC require such a 
weak CRA plan?
    Ms. Gonzalez-Brito. That is a great question, Congressman, 
and one that we haven't had an answer to. I think the OCC did 
negotiate a CRA plan with CIT-OneWest, and in that plan, 
OneWest included mortgages to upper-income borrowers and luxury 
condos. And now, we are seeing some of those kinds of 
activities in the proposal that you are seeing the OCC put 
forth now.
    I think the OCC, unfortunately, has a record of waving 
mergers through, and what we should be seeing is more stringent 
CRA plans being required by banking regulators. And 
unfortunately, we are seeing relaxation of the types of 
requirements that banks are required to do.
    Mr. Garcia of Illinois. Thank you for pointing that out. I 
would like to note that my bill, the Bank Merger Review 
Modernization Act, requires merging banks to have outstanding 
CRA performance records and a strong community benefits plan.
    Let's turn now to the OCC's proposal. As Mr. Rodriguez has 
highlighted, Chicago played an important role in the history 
and the creation of the CRA. I have to give a shout-out to the 
late Gale Cincotta, who was a heroine in Chicago, a champion 
for the people all over the country, and someone who inspired 
me in the field of community development. I am a former housing 
counselor with Neighborhood Housing Services and rose to become 
a director of one of the branches.
    A law that was written in response to redlining in 
communities like mine should have its exams informed by the 
richest possible data, but the current CRA doesn't work this 
way. Advocates have repeatedly pointed out that the CRA does 
not explicitly examine whether lending is occurring in 
communities of color. Advocates have also recommended that 
provisions of the Dodd-Frank Act be fully implemented so that 
CRA exams can more accurately scrutinize small business 
lending. As one advocate put it, ``Small business lending 
should really be just that, loans to small businesses rather 
than loans under $1 million.''
    Ms. Levi, by changing the definition of small business to 
those with revenues of up to $2 million, doesn't the OCC 
proposal move things in the complete opposite direction?
    Ms. Levi. Yes, it does. The CFPB estimated that 95 percent 
of small businesses had revenues of $1 million or less, so I 
think that stat speaks for itself. And most small businesses 
need small dollar credit.
    Mr. Garcia of Illinois. That is where the business is and 
the action, and that is where we should be targeting.
    Ms. Levi. Right. And it is not targeted.
    Mr. Garcia of Illinois. Finally--and thank you.
    I would like to ask each of the witnesses to briefly, if 
they can, provide some examples of smaller, more complex 
projects that might actually be more beneficial to the 
community than a flashy, high-dollar project like the stadium 
renovation.
    Chairman Meeks. Pick one.
    Mr. Rodriguez. Quickly, the housing counseling program that 
you had an opportunity to work with was created many, many 
years ago out of a CRA-credited investment between banks and 
industry and GSCs and community organizations. It is now highly 
successful. Thousands and thousands of families go through the 
home buying process today and get into homes with the support 
of local counselors.
    Chairman Meeks. The gentleman's time has expired.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman.
    Chairman Meeks. All time has expired.
    I now recognize the ranking member, Mr. Luetkemeyer, for 1 
minute for the purpose of a closing statement.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. And I thank all 
of the panelists for being here today. It was a lively 
discussion. You have added a lot of good information and 
thoughts to the discussion here.
    What we are talking about today is the Community 
Reinvestment Act, key word ``community.'' A lot of the 
attention today was focused on housing, which is fine, but I 
think what we were trying to do here with the readjustment of 
the Community Reinvestment Act is to look at a more holistic 
approach, a wider approach and say, wait a minute. What makes 
up a community? Not just homes, but also businesses, also 
services, places for jobs. So if the bank is not incentivized 
to do that, to invest in those food pantries and churches and 
community centers and small businesses, we don't have a 
community.
    So, this is the problem that we have. And I will tell you, 
I am probably the only one in this room today who has actually 
filled out one of these CRA exam reports, because I have done 
that in one of my former lives. So I can tell you the 
difficulty in filling it out. The difficulty in getting 
excellent credit from the CRA folks, that is very, very 
difficult to do. It is not just a rubber stamp. Trust me, it is 
not.
    So, I want to do one thing first. Thank you for your 
comments. I want to ask you, though, to please comment during 
the comment period with your suggestions, but come up with a 
solution. Don't just comment, ``I don't like this, I don't like 
that.'' Give us solutions on how you can make it better, okay?
    One solution I am going to give you right now with regards 
to homes versus all of these other things is, why don't you 
weigh it? Homes account for this much, and all of these other 
things that you invest in account for this much. If it doesn't 
weigh 1 to 1 or 2 to 1, whatever, weigh it. That is an example 
of a way I think we can solve a problem.
    The other thing I want to point out, and I am going to take 
the gavel away from the chairman for just a second here, is one 
of the problems that we have with CRA, as a former bank 
examiner and a former banker myself, was the abuse by the 
regulators of CRA over the last several years. This was a huge 
problem. I know a number of banks in my district that were not 
allowed to expand. They were forced to do things because--and 
they kept the CRA exam open for as long as 3 years in one 
situation because the regulators forced them to try and do 
something they didn't want to do. They wouldn't allow them to 
go out and buy another bank or consolidate or anything like 
that, and they kept the exam open for 3 years.
    It is that kind of abuse that was there from the former 
regulators that we are also fighting with this new regulation 
today. And don't forget that when you look at this new 
proposal. There is a lot in here that we need to put in place 
so you can keep that abuse from happening again.
    Mr. Chairman, with that, you are a fantastic chairman. I 
will give you back your gavel. I thank you for allowing me the 
time.
    Chairman Meeks. I would like to thank our witnesses for 
their testimony today. And as we close, it is important to 
remember that we are here to debate the implications of 
critical rulemaking on the lives of millions of low- and 
moderate-income American families.
    Regrettably, the United States has a long, ugly history of 
federally sanctioned and enabled cultural and corporate 
discrimination. The legacy of this discrimination echoes today. 
We collectively have an obligation as legislators, regulators, 
corporate executives, and community advocates to act in an 
intellectually honest manner and tackle these issues which have 
real impact on real people in disenfranchised communities.
    The people who will be impacted by the changes of these 
rules and regulations are the least fortunate among us and live 
in all of our districts. This isn't picking sides or saying 
that you are a Democrat or a Republican. This is about ensuring 
that communities that continue to bear the burden of 
discrimination and exclusion are not abandoned by our banking 
system and left in a perpetual cycle of disinvestment and 
exclusion. This is about getting it right.
    No expediency. It took 25 years to get to where we now have 
to remodernize it. If we don't get it right, we are going to 
hurt these people, not help them. We need to take our time and 
make sure we get it as right as we possibly can, because if we 
don't, we can destroy a community and people who need the most 
help. Let us take the time to get the comments from everyone so 
we can get it right.
    And I think that we can tell by the participation of the 
Members at this hearing on both sides of the aisle that this is 
really important. It is why this is the second time we have had 
a hearing on CRA. It is why we are going to have Mr. Otting in 
here. It is why we will have the Fed back in here. This is too 
important for us to just wipe and move along without making 
sure we get it right.
    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 5:03 p.m., the hearing was adjourned.]



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