Trump’s bank regulators are trying to gut fair lending laws

• Key insight: For more than 50 years, federal laws like the Community Reinvestment Act have worked to make home ownership available to all Americans. The Trump administration is moving to roll back that progress.
• Supporting data: After the Community Reinvestment Act was implemented, Black homeownership rose from 40% in the early 1990s to a peak of nearly 50% in 2004. After the 2008 financial crash and Trump’s first presidential term, it fell back to 40% before rising again during the Biden administration.

Consistent with Donald Trump’s reported history as a racist landlord, the bank regulators he controls are now proposing to gut one of the nation’s foundational laws aimed at combating credit discrimination, including redlining, where specific neighborhoods are excluded from opportunities available to other people.

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Trump’s real estate career began with a protracted legal battle alleging he and his father discriminated against prospective tenants who were Black. The U.S. Justice Department investigated the issue and, in 1973, sued Trump. A subsequent investigation by The New York Times uncovered a long history of racial bias at his family’s properties in New York and beyond. 

In a fictional Hollywood film of these events called The Apprentice, Trump attorney Roy Cohn blackmailed the prosecutors into dropping the case. Cohn also taught the young Trump key lessons: attack, attack, attack; deny everything, admit nothing; and no matter what happens, claim victory and never admit defeat. In reality, Trump settled the lawsuit without admitting guilt. Nevertheless, Cohn’s lessons play out daily in the White House.

In the same era, Congress advanced laws to combat racial discrimination with the 1968 Fair Housing Act and the 1974 Equal Credit Opportunity Act. In 1975, Congress approved the Home Mortgage Disclosure Act, or HMDA, to quantify where and to whom banks made loans.

In 1977, Congress built on these laws with the Community Reinvestment Act, or CRA, authored by Sen. William Proxmire, chair of the Banking Committee at the time. The CRA went beyond data collection and added teeth: If banks failed to demonstrate fair lending, regulators could block a merger.

Congress assigned three regulators to enforce it: the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. Recent U.S. Supreme Court decisions increased the president’s power to fire certain regulators but the high court has indicated that Federal Reserve governors enjoy special status. Trump’s current attack on the CRA comes only from the comptroller and the FDIC, which he claims to control. The Federal Reserve did not join his proposal.

These Trump-controlled regulators are trying to debase the CRA. Their proposal sets a woefully low threshold for community reinvestment funding, calls for community investments totaling a small fraction of total assets, and would generate funding that is 85% less than the nation’s hundred largest banks now devote to this sector. At a large bank, for every $100 million in assets the bank could devote as little as $62,500 to qualified projects.

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The proposal also excuses banks with less than $10 billion in assets from full scrutiny. Among other problems, this may reduce demand for the Low-Income Housing Tax Credits, or LIHTC, an important driver of affordable housing development. This proposal would worsen the nation’s housing crisis.
Trump’s bank cops also redefine the “purpose” test to promote economic development. For example, funding data centers provides little ongoing employment relative to the cost of construction. But under the new proposal, such investments might qualify.

After the Community Reinvestment Act was implemented, Black homeownership rose from 40% in the early 1990s to a peak of nearly 50% in 2004. After the 2008 financial crash and Trump’s first presidential term, it fell back to 40% before rising again during the Biden administration.

The fate of the Community Reinvestment Act may not command debate around the average kitchen table. But it has served as a tool to fight racism in real estate and has helped promote affordable housing.

Now is the time to let regulators know that you oppose these racist proposals and support the CRA by emailing comments to the FDIC and OCC. If faced with enough public opposition, they will back down.

Discriminatory lending laws and practices were a blight on this country, and the laws that stopped them were working as intended. They put home loans in reach for millions of people of color who worked hard and earned the credit they are owed. Let’s keep it that way.