A Banker’s Perspective on the CRA

59 The Community Reinvestment Act (CRA) of 1977 has survived more than three decades of restructuring of the banking industry, of sporadic changes in the regulations, and of an evolution of best practices in community development. The CRA has seen many successes but is now in need of a major overhaul if it is to continue to play a meaningful role in strengthening lowand moderate-income (LMI) communities. This article frames a number of issues that should be considered as part of any process to alter the CRA or expand it to other industries. I have worked in community development for more than 22 years both in government and in the private sector. As head of Community Development at JPMorgan Chase, where I spent the past 19 years, I witnessed major shifts in how banks oversee their CRA programs and how these changes have affected the way they meet their CRA obligations. While I have been on both sides of the table, as banker and government official, my purpose here is to provide a banker’s perspective to illuminate the forces that have affected the CRA and to suggest some principles that could make it more effective. The first section of this article provides a brief overview of the evolution of the banking and regulatory worlds, while the second highlights some of the problems that have led to inconsistent treatment, trade-offs, and unnecessary or unintended costs of regulations. While some of these problems are inherent in any regulatory process, some are particular to the CRA and so may be easier to reform. Based on this analysis, the last section outlines some principles that might help guide the future direction for the CRA. Suggested approaches include: more clarity of focus; reevaluating trade-offs implicit in using quantitative versus qualitative tests in the examination process; and redesigning or eliminating some tests and tailoring It’s the Rating, Stupid: A Banker’s Perspective on the CRA Mark Willis* Ford Foundation Visiting Scholar