ELIZABETH WARREN UNITEO STATES SENATE WASHINGTON, 0C 20510-2105 p 202 224-4543 MASSACHUSETTS COMMIT!HS BANKING. HOUSING, AND URBAN AFFAIRS HEALTH, EDUCATION. LABOR.AND PENSIONS 1lnitcd iStatcs ~cnatc ARMED SERVICES 2400 JFK F1'0ERAL BUILDING 15 NEW SUDBURY STREET BOSTON , MA 02203 p 61 7-56f>...3170 1560 MAIN STREET SUIT!.'406 SPRINGFIELD, MA 01103 p 413 788-2690 SPECIAL COMMITTEE ON AGING April 24, 2018 www warren sanate-gov The Honorable Jerome Powell Board of Governors Federal Reserve System 201h Street and Constitution A venue, NW Washington, D.C. 2055 1 Dear Chairman Powell, On March 30, in recogniti on of the Fair Housing Act' s fiftieth anniversary, President Trump declared Apri l 2018 as National Fair Housing Month and announced that his Administration " intends to deliver on the promise outlined by the Fair Housing Act, by ending prejudice and unlawful discriminatory practices in the sale, lease, and financing of housing." 1 As one of the agencies charged with ensuring compliance with the Community Reinvestment Act (CRA), a law designed to address the disgraceful historical practice of redlining, 2 the Federal Reserve has a critical role in making sure that the institutions it supervises are serving their customers fairly. I am writing to request information about how the Federal Reserve is executing this mission. Fifty years after the Fair Housing Act became Jaw, housing discrimination remains a serious problem in the United States. According to a recent study by the Center for Investigative Reporting and Reveal, minority borrowers are more likely to be denied a mortgage than similar white borrowers in 61 metropolitan areas-even after controlli ng for loan amounts, neighborhoods, and applicants' income. 3 To combat housing and lending discrimination, it is critical that federal regulators uphold and enforce the rules put in place to protect American communities. The CRA was enacted to curb lending discrimination and to ensure that banks help meet the credit " needs of the communities in which they are chartered to do business."4 The Federal Reserve, along with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), is tasked with developing regulations and evaluating 1 President Donald J. Trump, "President Donald J. Trump Proclaims April 2018 as National Fair Housing Month," The White House (March 30, 2018) (Online at: https://www.whitehouse.gov/presidential-actions/president-donald-jtrump-proclaims-april-2018-national-fair-housing-month/). 2 "History of the CRA," Federal Reserve Bank of Minneapolis (Online at: https://www.minneapolisfed.org/communitv/cra-resources/history-of-the-cra-new). 3 Aaron Glantz and Emmanuel Martinez, "For people of color, banks are shutting the door to homeownership," Reveal (February 15, 2018) (Online at: https://www.revealnews.org/article/for-people-of-color-banks-are-shuttingthe-door-to-homeownershipD. 4 12 u.s.c. § 2901 banks' compliance with tl1e CRA as part of its examination program. 5 Any institution regulated b)' these three agencies \ViU1 assets valued at $1.252 billion or 1nore is subject to data collection that allows tl1e Federal Reserve (Fed), OCC, and FDIC to e\'aluate these banks' compliance with tl1e CRA. 6 Tl1e three regulatory agencies conduct con1prehensive tests and detertnine if a bank 11as one of four ratings: Outstandi11g, Satisfactory, Needs to Improve. or Substantial Nonco1npliance. 7 Earlier this n1onth, tl1c Treasury Depart1nent released a set of recon1n1endations to the primary CRA regulators. on how to "inodemize" that \aw. 8 Recent reports also indicate that the Federal Reserve has been working with the OCC and FDIC on "a11 interagency redo'' ofCRA rules, and is close to releasing tl1ose cha11ges. 9 The OCC has already taken action - i11 October 2017 it issued a new Policies and Procedures Manual tl1at weake11ed its ability to penalize "banks suspected of discriininatory le11ding" 10 by allovving lenders to avoid double downgrades and penalties if the)' pron1ise to take action. In a recent appearance before the I-Iol1se Financial Services Co1n1nittee, you stated that the Fed "take[ s] a very serious view of any ki11d of racial discrin1ination in lending and ... look[s] at it through a variety of ... consun1er at1'airs too\s.'' 11 In order to better tinderstand the Federal Rcserve's approach to the CRA and how the agency intends to fulfill the President's \'OW to "deiiver on tl1e pro1nise otttlined by the Fair I-lousing Act,'' I ask that you provide answers to the l'ollowing qt1cstions no later than May 8, 2018. 1. How many CRA examinations 11as the Federal Reserve co11dl1cted in each of the last five years? a. Wl1at percentage of banks received eacl1 of the four ratings in each year? b. I-Iov-.' often on average elapses between CRA exa1ninations? " 12 U.S.C. § 2902 °Co1n1nunity Reinvestn1en! Act "2018 Reporting Criteria" P'edera! Financial Institutions £\an1inatio11 ('ounci! (Online at https://\V\VW. ffiec.gov/cralrepo1ter l 8.ht1n). 7 12 u.s.c. § 2906 & 'freasury Depart1nent Press Release, •'Treasury Releases Comrnunity Reinvestinent Act Moden1ization Recomn1cndations," Depart111en1 qf'the Treasu1y (April 3, 2018) (Online at: https://ho1ne.treasurv.gov/news/pressre 1eases/sn103 3 6). 9 Allison Bisbcy "New CRA proposal scheduled for release in March: OCC's Otting" A111ertca11 Banker (February 27, 20 18) (Online at: https://ww\v .an1cricanbanker.co1n/news/ne\v-cra-proposal-scheduled-for-release-ncxt-monthoccs-otting). 10 Ben Protess and Jessica Silver-Greenberg, •·under Trump, Banking Watchdog Trades Its Bite for a Ta1ner Stance," The Ne~!' York Ti111es (Nove1nber 15, 2017) (Online at: https://w\V\V .nvtimes.co1nf?O 17 I! 1/ ! 5/busincss/bank-regulation.htinl); Policies and Procedures Manual, "hnpact of Evidence Discri1ninatory or Other JI legal Credit Practices on Con1n1unity Reinvestment Act Ratings," Office ofthe Crnnptroller o.f the Currenc;' {October !2, 2017) (Online at: W-s://w\vw .occ.gov/publications/pub!ications-bytype/other-publications-reports/ppins/Rpm-5000-43.pdD. 11 C-Span "Monetary Policy and the Econo1ny Federal Reserve Chair Jero1ne Pov.·cll appeared before the I-louse Financial Services Co1nmittee" (February 27, 2018) (online at: https://\V\VW.c-span.orf!/video/?440903-l/federalreserve-chair-povvell-testifies-moneta1y-policv-econo1ny&start=3554). 2. Please list any and all changes the Federal Reserve plans on making to regulations or procedures governing CRA enforcement, and how those changes allow the agency to better regulate "unlawful discriminatory practices in the sale, lease, and financing of housing." a. Does the Federal Reserve plan to incorporate any of the recommendations from the Treasury Department into its reforms? 3. Are you, or any other Federal Reserve employees, consulting with or discussing changes to CRA enforcement policies with any outside entities - including lobbyists or representatives of the banking or financial services industry - in revising the CRA enforcement rules? If so, please provide a list of any and all meetings where these changes were discussed, and a list of all participants. 4. Please provide a list of all meetings that have taken place as a result of the "interagency redo," including topics of the meetings and the participants. 5. How does the Federal Reserve measure the effectiveness of the agency's efforts to reduce housing discrimination? Please provide an analysis of the agency's performance over the last two years. 6. Please describe any Federal Reserve initiatives in place, beyond CRA enforcement, to address housing discrimination. Sincerely, eth Warren States Senator