Dallas signals that it wants banks to be better lenders in poor neighborhoods | Opinion
Dallas has a simple message to banks that want to do business with the city. If you want the city’s more than $200 million in deposits, then you have to be serious about investing in minority communities and willing to open your books to prove it.” that would require banks competing for the city’s deposits to submit loan data showing how much they lend in minority neighborhoods and to submit reinvestment plans setting targets for future lending.
The reality is that Dallas’ proposal, while long on righteousness, is mostly symbolic and limited in scope. Regulatory oversight of banks rests with state and federal regulators, which leaves cities to cajole and incentivize investment choices. With no authority to demand where and how banks invest, the city is attempting to use its financial leverage to encourage banks to be more active lenders and participants in underserved neighborhoods as a condition of winning the city’s deposits.
Banks play essential roles in providing access to capital and in meeting the credit needs of communities and in some instances have been significant partners in the solution. But communities live and die based on the ability for residents to access capital and credit. The city is right to hammer home that point as frequently as possible and to remind financial institutions of their obligations to treat neighborhoods fairly.
In the long run, Dallas and other cities that face reinvestment challenges could benefit from a more robust Community Reinvestment Act. Passed in 1977, the milestone federal law required banks to fairly serve their customers and to stop redlining and other lending discrimination.
Dallas’ checkered past of systemic disinvestment deprived southern Dallas neighborhoods of access to bank branches, loans and economic development opportunities. Longstanding patterns of disinvestment will not be reversed swiftly, but positive change will come when financial institutions, the city and community groups work collaboratively to level the investment playing field.
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