Pub. 8 2020 Issue 1

www.uba.org 2 T he B ottom L ine Howard Headlee President Utah Bankers Association unique and innovative banks. These banks collect deposits and make loans all over the country, but when it comes to the CRA, the community they are required to serve is limited to Salt Lake County. This has resulted in billions of dollars of investments, grants and service hours flowing into our local community. In national circles, Salt Lake County is commonly referred to as a CRA “hot spot” and frequently used by advocates as an example of why the 40-year-old law needs to be modernized. Another factor driving modernization is frustration with a lack of transparency and predictability as to what investments will qualify. This ambiguity can be used as a weapon by regulators looking for leverage during an examination or third parties hoping to receive additional financial support. So it would seem like taking a fresh look at CRA after 40 years might make some sense? Not so fast. In Washington, D.C., everything depends on who is in power. In this case, a Trump nominee is propos- ing rules to modernize CRA; therefore, Democrats will oppose it and suggest everything associated with it is wrong. Republicans are on board and they know if they are going to get this done, they will have to act soon, before the Con- gressional Review Act (the other CRA) would allow Democrats to revoke their new rules should they take control of the Senate in November. In the end, what should be a technical, data-driven discussion as to how to adapt this successful program to a rap- idly changing environment to meet the evolving needs of various communities, becomes a political football. It’s a shame because, under different circumstanc- es, I am confident we could achieve a much better product. And the better the product, the better the outcomes for our communities. Nonetheless, there is no sign of less politi- cal times in Washington, D.C., on the horizon, and some modernization is probably better than no modernization at all. So, we are left with some of the real problems with the current proposal: How do you define a local community for a bank that lends all across the country but has no local presence or understanding of a particular community’s needs? How can we comment on the new standards before we have time to run the numbers? How can we avoid creating new “hotspots” in a handful of the largest states and not prior- itizing the needs of the rest of the nation? And what about the potentially signifi- cant costs associated with the change for smaller institutions? I don’t have the answers to these ques- tions, and because of the political cli- mate in Washington, D.C., we probably don’t have time to find them. The stakes are high for all banks, especially the smaller banks, as well as every commu- nity, especially Salt Lake County and the State of Utah. So, what is the cost of partisanship in Washington, D.C.? How does it impact our community? We are about to find out. n W e all get tired of the non-stop partisanship coming out of Washington, D.C., but does anyone really understand what it costs the country? How does it impact us individually? How does it affect our communities and the lives we lead? The cost of the constant contention in Congress is sometimes hard to quanti- fy, but it is real. Most people in Utah know nothing about the Community Reinvestment Act (CRA) even though it has had a massive impact on our local community. The CRA is a law adopted back in the 1970s to address the issue of “redlining” in places like Chi- cago. The goal was to ensure that people in every community had access to basic financial services. But as a result of the unique growth of the banking industry in Utah, it has generated a significant bene- fit to Utah and resulted in the investment of billions of dollars into low-to-moderate income communities in Utah. The CRA requires banks to provide ser- vices to the entire community where they are chartered. It was a short, pretty straightforward law that hasn’t been sub- stantially modified since 1977. And that has become a big problem because bank- ing has changed quite a bit since then. This is especially true in Utah. Since 1977, Utah has become one of the five largest banking states in America. We have many of the most successful tradi- tional banks, both large and small, but we are also home to some of the most