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 i am grateful to amanda roberts and matthew lambert of the federal reserve board for their assistance in preparing this text. the views expressed here are my own and do not necessarily reflect those of the federal reserve board or the federal open market committee. see lael brainard, “ financial inclusion and economic challenges in the shadow of the pandemic : a conversation with tribal leaders ” ( speech at fed listens : roundtable with oklahoma tribal leaders, oklahoma city, oklahoma, october 13, 2021 ), https : / / www. federalreserve. gov / newsevents / speech / brain

depicted in the figure show no obvious signs of a current problem with market liquidity. in 2006, investors traded an average of $ 12 billion a day. during the height of the financial crisis, trading volume decreased to $ 8 billion a day, but, by 2009, volumes appeared to have fully recovered. today trading volumes are at about $ 19 billion a day. on balance, the evidence presented in these two figures seems to suggest that market liquidity has not deteriorated in recent years - - subject, of course, to the caveat i just discussed about the possibility that our measures of bid - ask spreads could be distorted by the increasing role of investors as suppliers rather than demanders of liquidity. 11 as an aside, the market liquidity figures shown are only for the corporate bond market, but we see similar patterns in the equity and treasury markets. 12 that is, we do not find convincing evidence that liquidity has markedly declined in those markets. policy issues related to market liquidity while the evidence for changes in market liquidity does not point clearly to a reduction, i have highlighted some recent research that indicates the possibility that market liquidity has fallen. to date, observed changes in liquidity do not suggest that trebbi and xiao ( 2015 ) analyze multiple corporate bond liquidity measures and conclude that there is no evidence of deterioration in liquidity due to regulation. secured funding spreads have increased, suggesting higher intermediation costs in the repo ( repurchase agreement ) market. - 7shifts in liquidity are having a notable effect on the cost of trading. nonetheless, the potential for liquidity to evaporate in times of stress deserves careful scrutiny - - along with broader risks to financial stability associated with changes in markets. one area where policy concerns have arisen is related to the potential for fire sales in bond markets, which could compound the risks associated with leverage in the financial sector. bond markets have grown considerably, and market - based finance has intensified over the past years, making market liquidity even more important. 13 in addition, mutual funds that offer daily redemption rights hold a greater share of bonds than investors who buy and hold. as shown in figure 5, the share of investment - grade and high - yield corporate bonds held at mutual funds ( the solid blue area ) has hovered around 25 to 30 percent in recent years, up from about 15 percent before the crisis. reduced market liquidity might exacerbate fire sale risks from leverage at financial institutions or