Federal banking regulators announced Friday a plan to reform the Community Reinvestment Act (CRA), a move intended to stop what critics call a decades-old "shakedown" scheme where left-wing activist groups allegedly extract billions from U.S. banks.
The joint proposal from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. targets how banks earn credit under the 1977 anti-redlining law. The CRA is designed to encourage financial institutions to meet the credit needs of the communities where they operate, including low- and moderate-income neighborhoods.
Under current interpretations, banks are graded on local lending, community investments, and branch networks. A poor score can impede mergers. Critics argue that banks have historically bolstered their ratings by donating to advocacy groups, which then provide endorsements to regulators. These groups, according to critics, have used the threat of regulatory protests to pressure banks into large community benefits agreements.
Overhauling Regulatory Credit
The new proposal, obtained by The Post, would prevent banks from receiving regulatory credit simply for donating to activist organizations. Instead, institutions will be required to demonstrate direct lending to local families and small businesses to meet their CRA obligations. Philanthropic gifts will only count toward federal ratings if the funds directly support local credit needs.
"Banks are going to actually have to do and rely upon their record, actually meeting the credit needs of the local communities in which they operate," Comptroller of the Currency Jonathan Gould told The Post. "This government-mandated shakedown needs real reform," stated Sen. Bill Hagerty of Tennessee, echoing sentiments that the CRA has been "weaponized" by activist groups.
Republicans have specifically identified the National Community Reinvestment Coalition (NCRC) as a primary beneficiary of this alleged scheme. A senior administration official described the NCRC as the "biggest shakedown artist-in-chief." In April 2024, the NCRC reached a $25 million agreement with KeyBank following regulatory scrutiny over the bank’s minority lending practices.
Past mergers have seen significant financial commitments demanded by activist coalitions. When BMO Financial sought to acquire Bank of the West, the California Reinvestment Coalition and the NCRC protested, leading BMO to agree to a $40 billion community benefits plan. Similarly, US Bank committed $100 billion over five years to satisfy activist groups during its acquisition of MUFG Union Bank in 2021.
New Requirements and Relief
The proposed rules also introduce stricter controls for community development grants. To qualify for credit, grants must be directly used for community development projects, with recipient organizations limited to spending no more than 15% on administrative overhead.
The evaluation of retail services will also be narrowed to focus strictly on credit services, excluding deposit accounts, which regulators believe will better reflect how local credit needs are met. The proposal also offers regulatory relief to community banks, raising the asset thresholds for small and intermediate banks, exempting them from some data collection and reporting requirements.
Regulators intend to publish a list of qualifying community development activities, focusing on affordable housing, civic aid for lower-income residents, economic development, and neighborhood stabilization. Senior administration officials anticipate legal challenges to the changes, potentially from Democrat-controlled states.
Notably, the Federal Reserve did not join in the proposal, meaning state-chartered banks within the Federal Reserve System will continue to operate under the existing CRA rules.