Strengthening the CRA: A Conversation with Representatives of Native Communities
Remarks by
Lael Brainard
Vice Chair
Board of Governors of the Federal Reserve System
at
National Native Coalition Virtual Series on the Community Reinvestment Act Notice of
Proposed Rulemaking
(via webcast)
July 19, 2022
Good afternoon.1 I am happy to join you today for the National Native Coalition
listening session to discuss the Community Reinvestment Act (CRA). I want to thank the
National Congress of American Indians and its many tribal partners, as well as Casey
Lozar and his team at the Center for Indian Country Development at the Federal Reserve
Bank of Minneapolis. I am pleased to be joined by Acting Comptroller of the Currency
Michael Hsu of the Office of the Comptroller of the Currency (OCC) and Acting
Chairman Martin Gruenberg of the Federal Deposit Insurance Corporation (FDIC).
In May, the Federal Reserve, the OCC, and the FDIC issued a unified proposal to
modernize the CRA regulations. This is a once-in-a-generation opportunity to strengthen
the CRA to bring greater credit, investment, and banking services to the communities that
have faced the greatest challenges. For the first time, the CRA will provide powerful
incentives for banks to make investments in communities that do not have access to
branches, such as in Native lands.
As representatives of Native communities, you know all too well the challenges
faced by Native communities in getting access to financial services-challenges that
were made worse by the pandemic. I have visited with Native communities in South
Dakota and Oklahoma and seen firsthand the resiliency and innovation of these
communities in the face of numerous challenges.2 Even with the implementation of the
CRA and other complementary laws, tribal economic inclusion is hindered by a lack of
banking and credit access. As of the most recent 2019 data, over 16 percent of Native
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Americans are unbanked-three times higher than the rate for all U.S. households.3 In
part, the large share that is unbanked reflects low access to a bank branch. As of 2021,
majority-Native American counties have an average of only two and a half bank
branches-less than one-tenth the 26-branch overall average for all counties nationwide.4
Native small businesses often struggle to access capital: CRA small business and small
farm lending per capita in majority-Native American census tracts is only about a quarter
of that in majority-White-non-Hispanic tracts.5
As representatives of Native communities, you bring valuable insights to CRA
reform because of your extensive knowledge of the investment and credit needs of Native
communities, citizens, and businesses. The interagency CRA proposal was informed by
consultation with Native representatives through roundtables, listening sessions,
meetings, and comment letters. Indeed, we took much of your feedback from comment
letters to develop the Native Land Areas sections of this proposal. As a result of this
valuable feedback, the interagency CRA proposal would provide additional scope for
bank loans, investments, and services in Native communities. Today, I want to focus on
several aspects of the proposal that are beneficial for Native communities.
First, the proposal provides greater incentives for community investments in
Native Land Areas by providing enhanced clarity and specificity about what activities
qualify for CRA credit. The proposed activities in Native Land Areas cover four specific
place-based categories: revitalization; essential community facilities; essential
3
Federal Deposit Insurance Corporation, "How America Banks: Household Use of Banking and
Financial Services," FDIC Survey (2019), https://www.fdic.gov/analysis/household-survey/.
4
Information calculated using Summary of Deposits (SoD) 2021. Note that not all counties, especially
some with high Native American populations, exist in the SoD dataset.
5
Federal Reserve Board staff analyzed annually reported CRA Small Business and Small Farm loan data
submitted by banks at the tract level and combined it with demographic data from the American
Community Survey 2015-2019 5-Year Survey.
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community infrastructure; and disaster preparedness and climate resiliency. The proposal
also incorporates a new definition of Native Land Areas based on the political status and
government recognition of tribes and tribal areas that would enable the qualification of
place-based activities in Native Land Areas.
The proposal also provides clarity for Native community development financial
institutions (CDFIs) and minority depository institutions (MDIs). Recognizing that
Native CDFIs and MDIs are critical players in supporting credit access and investment in
Native communities, the proposal provides additional certainty that activities with
Treasury-certified CDFIs will qualify for CRA consideration and provides greater clarity
to banks on receiving credit for activities with MDIs.
The agencies also propose maintaining a publicly available illustrative list of
eligible community development activities, which provides an opportunity to highlight
qualifying activities particularly responsive to the needs of Native communities.
In another important change, the proposal would result in greater CRA activity
outside of where banks have branches and physical locations in order to address unmet
needs in communities that have more limited access to bank branches. To this end, we
also propose evaluating the impact and responsiveness of a bank's community
development activities through a series of specific qualitative factors, with activities
benefitting Native communities as one of those specific factors.
In addition, now that many banks conduct significant lending and investments
outside of their branch networks, it is important to ensure CRA accounts for these
different business models. For example, we propose establishing retail lending
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assessment areas where a large bank has a concentration of either 100 mortgage loans or
250 small business loans for two years in a row.
Finally, the proposal would continue to emphasize a bank's performance in the
local communities where it maintains branches, regardless of their performance in other
areas. In addition to assessing a large bank's retail lending and community development
activities in each facility-based assessment area, we also propose to evaluate whether
banks have branches in low-income and moderate-income census tracts. In particular, the
agencies propose providing positive qualitative consideration if banks operate branches
located in Native Land Areas.
In closing, your feedback is key to ensuring that we get CRA reform right. I
strongly encourage you to submit a comment letter by the August 5th deadline. We look
forward to reading each comment letter and deeply appreciate your insight and
participation with us through the rulemaking process. Thank you.