Warren urges bank regulator to scrap anti-redlining rule rewrite
Sen. Elizabeth WarrenElizabeth WarrenFormer US ambassador to EU: Trump reminds me of Mussolini Twitter CEO responds to Trump: ‘Not true’ that removing campaign video was illegal Biden formally clinches Democratic presidential nomination MORE (D-Mass.) is urging a top federal bank regulator to scrap a controversial rewrite of anti-redlining regulations released by his predecessor last month and recuse himself from any attempt to issue new rules.
In a letter to acting Comptroller of the Currency Brian Brooks released Tuesday, the senator called on the agency to withdraw new rules for banks to follow under the Community Reinvestment Act (CRA), a 1977 law intended to ensure that banks lend to and serve low-income and majority-minority areas.
The Office of the Comptroller of the Currency (OCC) released its long awaited CRA overhaul on May 20, less than five months after first proposing the changes. The quick release of the new regulations came just a day before former Comptroller of the Currency Joseph Otting abruptly resigned, and without buy-in from the Federal Reserve Board and the Federal Deposit Insurance Corp. (FDIC) — the other two federal bank regulators that enforce the CRA.
While Republicans and some banking industry advocates praised Otting and the OCC for their quick action, Democrats and fair lending groups accused the agency of gutting the CRA with a rushed rule that would fail to boost lending in underserved areas.
“You now have an opportunity to undo this damage, and you should do so immediately. First, you should withdraw the final CRA rule to provide clarity to all stakeholders that the implementation of these regulations will never see the light of day,” Warren wrote to Brooks.
Brooks and the OCC fiercely defended the new CRA regulations when they were released last month and waived the FDIC’s decision not to join the final version of the rule despite initially proposing it with the OCC in December. In a call with reporters in May, Brooks argued that the new CRA rules are needed more than ever due to the financial pressure caused by the coronavirus pandemic and included several changes sought by consumer rights groups.
“We really do believe that this is going to help accelerate the delivery of credit to the most distressed communities. Does anybody really want us to delay that?” Brooks said.
Even so, Democrats and industry critics argued that the new rules still depended too much on the volume of loans issued by a bank and not enough on particular services, raising concerns that banks would focus on high-value projects instead of broad-based lending.
Warren also urged Brooks to step aside from future CRA rulemakings because of his previous work with Otting at OneWest Bank.
Otting had been fiercely criticized for his work at OneWest Bank, where he served as chief executive and president while Treasury Secretary Steven MnuchinSteven Terner MnuchinOn The Money: S&P erases 2020 losses as stocks soar | US entered recession in February: NBER | Lawmakers worry IRS is giving rich people a pass The Hill’s Coronavirus Report: New America’s Anne-Marie Slaughter says countries around world are deciding not to trust US; All eyes on New York as city begins phased reopening Lawmakers worry IRS is giving rich people a pass MORE chaired the bank and Brooks served as vice chairman. The bank eventually foreclosed on more than 36,000 homes initially mortgaged by IndyMac, a failed bank purchased by OneWest, and Otting signed a settlement with federal regulators who accused the bank of automatically signing foreclosure papers without reviewing them properly.
The Department of Housing and Urban Development also approved a settlement last year between CIT Group, which purchased OneWest in 2015, and a California fair-lending nonprofit over claims that the bank OneWest violated the CRA and discriminated against black and Latino customers in the Los Angeles area.
“You should recuse yourself from all future CRA rulemakings given your experience at OneWest and work on the final rule that was issued,” Warren wrote. “When a new permanent Comptroller is confirmed, he or she should work with the Fed and FDIC to move forward.”
Letter to OCC on Scribd