Banks are rolling in it these days; between record profits in 2017 and the windfall from the December Republican-backed tax cuts, banks have rebounded from 2008’s financial meltdown, and the Dodd-Frank reforms passed in the aftermath of the Great Recession have prevented another crash. So why is the banking industry seeking to undo this progress?
Nicknamed the Bank Lobbyist Act, the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) advanced through a procedural vote in the Senate this morning with 67 votes (16 of them Democrats), and is expected to clear the Senate in the coming days. This Act is a banker’s wishlist. Bank lobbyists have descended upon Capitol Hill in recent days, clearly ignoring lessons from the 2008 financial crisis. There are many disturbing aspects of S. 2155, which is part of a larger Trump-backed effort to deregulate the banking industry. One of the most troubling of these is the bill’s rollback for new Home Mortgage Disclosure Act (HMDA) reporting rules, which would exempt 85% of all banks from these important reporting requirements.
Passed in 1975, HMDA requires most mortgage lenders to report to the government and ultimately, to the public, on mortgage lending activities. HMDA was intended to ensure lenders are meeting housing needs, to help local governments determine how best to allocate scarce resources, and to help identify discriminatory lending. HMDA data has been used extensively by government agencies in fair housing enforcement cases, and by the public and banks themselves to better understand whether banks are lending fairly to all neighborhoods and borrowers of all races. For millions of people of color across the country, this rather obscure banking law has helped to ensure that banks treat them fairly when they borrow money to buy a home.
But a new epidemic of modern-day discrimination and redlining has appeared; these practices are rampant nationwide, as evidenced by several recent cases. Last month, an investigation by Reveal, out of The Center for Investigative Reporting, used HMDA data to identify 61 metro areas across the country where redlining occurred. The analysis showed that Black, Latino, Asian, and Native American borrowers were significantly more likely to be denied home loans than whites. Reveal’s investigation provided evidence that several small community banks, as well as big financial institutions TD Bank and Capital One, had engaged in redlining. Last year, the California Reinvestment Coalition filed our own redlining complaint with the Department of Housing and Urban Development, after discovering that CIT Group failed to make home loans fairly available to communities of color and located more branches in white neighborhoods.
The banking industry has claimed that these lending disparities don’t actually exist — that lower credit scores explain the disparities. Yet the evidence shows that even controlling for credit scores, banks routinely make it more difficult for people of color to get affordable loans. Just last week, the City of Sacramento found that Wells Fargo was more likely to sell high-risk, high-cost loans (which are more likely to land borrowers in foreclosure) to their African American and Latino customers, despite the fact that the credit scores of these borrowers were not markedly different than those of other borrowers.They are also suing Wells Fargo for redlining.
According to Paulina Gonzalez, Executive Director of the California Reinvestment Coalition, “Congress should be working in the public’s interest, not for the benefit of corporations. With S. 2155, Congress has sunk to a new low with its zeal to favor big banks over everyday consumers. Communities and consumers should not suffer because Congress takes away tools to fight discrimination in lending.”
Discrimination in lending is still happening: The question is if Congress will move towards legalizing discrimination, in spite of clear opposition of the public, while taking away HMDA and other tools that have worked to promote fair lending and ensure that everyone has access to the American Dream.