The U.S. Impact Investing Alliance submitted comments to the Federal Reserve earlier today in support of their proposed framework to modernize the Community Reinvestment Act (CRA). A civil rights era policy created to address the racist practice of redlining, the CRA has become the bedrock of the community investing environment here in the United States, lending a stable environment to the place-based work of impact investors.
The Alliance's comments call on regulators at the Federal Reserve to pursue three main goals: 1) leverage the CRA to more directly address racial disparities in access to loan and investment capital; 2) broadly incentivize investments in community lenders, such as CDFIs and MDIs, that support low-income and underinvested communities; and 3) encourage banks to employ catalytic investment capital to better align the community development efforts of financial institutions, philanthropies, impact investors and others.
"The Federal Reserve has an important opportunity to affirm the historical roots of the CRA in combating racial discrimination, and at the same time helping to transform community investing to confront inequality," said Fran Seegull, President of the U.S. Impact Investing Alliance. "We're grateful for the leadership of the Board of Governors, which unanimously approved the proposed framework, and we hope that peers at the OCC and FDIC will move quickly to follow suit. A strengthened and modernized CRA will drive more private capital into historically underinvested communities as we strive to build a just and equitable recovery from the ongoing crisis set."
Unlike reform efforts undertaken by the Office of the Comptroller of the Currency (OCC) last spring, the Alliance believes the proposed framework put forth by the Federal Reserve has the potential to strengthen and reaffirm the CRA’s core purpose. The Alliance encourages each of the regulating agencies to align around the Federal Reserve’s proposal for a cohesive regulatory framework going forward.
This is the first step within a broader rulemaking process, and the Alliance looks forward to engaging with regulators in the months to come. For more information regarding the Alliance’s policy proposals for transforming community investing to confront inequality, see the report, Private Capital, Public Good.