Fed aims to ensure more access to credit for low and moderate income families

The Federal Reserve on Monday took steps toward revamping a 40-yearold law intended to ensure low and moderate income Americans have access to credit and banking services.

The move comes as the Fed is under urgent pressure to craft policies that lift all Americans, and in particular, reduce the long-standing racial gaps that are only widening in the current recession. Apart from setting monetary policy, economists and lawmakers say the Fed could go further in building a more fair economy through its supervision of banks, which includes the Community Reinvestment Act, known as the CRA.

The CRA was crafted to encourage banks to lend to low-income neighborhoods. Under the CRA, regulators routinely look at banks’ lending practices for low- and moderate-income borrowers, so that those with less money also have access to loans to buy houses, cars and make other purchases.

“The CRA is a seminal statute that remains as important as ever as the nation confronts challenges associated with racial equity and the covid-19 pandemic,” Fed Gov. Lael Brainard wrote in a statement. “We must ensure that CRA is a strong and effective tool to address ongoing systemic inequities in access to credit and financial services for lowand moderate-income and minority individuals and communities. “

Changes to the CRA laws are considered long overdue among banking experts, especially given the rise of online banking. The banking industry has argued that the CRA hasn’t been revised since more customers have shifted to mobile or Internet banking and the number of physical bank branches have been cut back.

Starting with Monday’s early proposal, the Fed is looking for feedback on how to strengthen retail lending to low- and moderateincome communities, where banks can get credit for community development activities and how online banks should be assessed.