Fed governors voted 5-0 to seek public comment on a major overhaul of its rules for the Community Reinvestment Act, a 1977 law aimed at ending redlining – the practice of banks to avoid lend in certain areas, often minority neighborhoods.
Banks now face the prospect of having to navigate different sets of rules if major U.S. regulators cannot agree on competing plans for the industry. Fed officials said on Monday they hoped to avoid the outcome. It could take months, if not years, for the Fed to complete the rule-making process.
Fed Governor Lael Brainard, the central bank’s resource for the overhaul, said on Monday that the rules remain “as important as ever” as the United States faces challenges of racial fairness and the coronavirus pandemic. “We need to make sure that the ARC is a strong and effective tool to tackle persistent systemic inequalities,” she said in a written statement.
Policymakers attempted to forge a consensus to update the rules of a law enacted over 40 years ago, before the advent of the internet, when most banking transactions were done at local branches.