Wall Street Pretends to Champion Racial Justice as it Undermines Civil Rights

By Caroline Nagy, senior policy counsel for housing, corporate power and climate justice 

In 2020, amid a global reckoning for racial justice, the largest Wall Street banks make public pledges to better serve communities of color. But their recent lawsuit to overturn the enforcement of the updated 1977 Community Reinvestment Act starkly undermines the principles they claim to champion. 

This February, the American Bankers Association sued the US government to overturn a newly-adopted rule updating enforcement of the 1977 Community Reinvestment Act, a civil-rights-era law that seeks to redress harms caused by redlining and other discriminatory actions against people of color by requiring banks to invest in the communities they operate in. 

This week, the banks succeeded in obtaining an injunction against the new rules from U.S. District Judge Matthew Kacsmaryk, a Trump-appointed federal judge best known for suspending approval of the abortion pill mifepristone. Their lawsuit contradicts the biggest banks’ proclaimed commitments to further racial justice in the wake of the 2020 uprising for Black lives. 

It follows a similar lawsuit by the bank trade associations that seeks to prevent the Consumer Financial Protection Bureau from issuing fair-lending guidance to address discriminatory banking practices, and another lawsuit to prevent the agency from compiling small business lending data, including demographic information about loan applicants and recipients. 

This hypocrisy is also seen in their recent cynical attempts to kill higher bank capital requirements under the pretense that they are concerned about their impact on mortgage lending to borrowers of color – despite their poor track record of actually providing mortgages to borrowers of color. 

Even though the big banks have pledged to do better, they have failed to increase their lending to borrowers of color. For example, in Oct 2020, JPMorgan pledged to create 40,000 new Black and Latine homeowners above its 2019 level. Instead, in 2021 JPMorgan only underwrote an additional 122 mortgages for Black homebuyers, and the number of loans to Latine buyers actually fell. These abysmal results are even worse considering it was during a period of massive support by the Fed to the banks during the Covid-19 pandemic. 

The updated regulations for the CRA are critical given the technological advances in the past 47 years, and specifically the advent of the Internet and rise of online banking. These advances were obviously not contemplated within the original CRA regulations, which assumed that all banking activities would occur at physical branches. 

The updated regulations also recognize the growing importance of funding climate resiliency and disaster recovery projects by giving banks credit for these activities. The rules also toughen overly-lenient CRA rating standards that had been criticized for allowing “grade inflation” for banks.

We still need a strong, modern Community Reinvestment Act because the harms caused by racial discrimination and redlining persist. The racial homeownership gap is at its highest point in a decade, with the Black homeownership rate currently 29 percentage points lower than the white homeownership rate, while the Latino rate is 22 percentage points lower. Due to the racial wealth gap, borrowers of color are also less likely to be able to pay a 20 percent down payment when buying a home. 

Wall Street and the big banks should be held accountable for their actions, rather than their hollow proclamations. When banks seek to undermine civil rights by suing to overturn the updated Community Reinvestment Act regulations or anti-discrimination guidance in small business lending, they are telling us that they do not truly value racial justice or eliminating inequity and systemic racism in the financial system. We should remember this truism the next time they try to pretend that their highest value isn’t profit above all else.