Giving Compass' Take:

• Claudia Sahm explains the history and benefits of the Community Reinvestment Act and how it could be improved going forward. 

• Is this the best way to increase equity at scale? What role can funders play in increasing access to credit for community projects? 

• Read about inclusive growth communities. 

What is the Community Reinvestment Act?
In 1977—the same year that the dual mandate was enacted—Congress gave the Federal Reserve an obligation to encourage banks to meet the credit needs of the communities where they operate. Banks cannot exclusively lend to the middle class and the rich. They cannot take deposits in a neighborhood and then choose not to serve those customers. Anyone with the ability to repay a loan, regardless of the color of their skin or the neighborhood they call home, deserves equitable access to credit. The Federal Reserve, with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, oversee this charge from Congress.

Why do we need Community Reinvestment Act?
The act was born out of an ugly history of racial discrimination in lending in the United States. For more, see Richard Rothstein’s Color of Law. Until the 1960s, banks often would not lend to minorities and minority communities. The U.S. government itself drew red lines on map—a process referred to as redlining—to tell banks where they could not make mortgage loans backed by government guarantees. Again, the federal government told banks not to lend to people of color, as you can see from a redlined map of Philadelphia from the 1930s.

Read the full article about the Community Reinvestment Act by Claudia Sahm at Equitable Growth.