Bill to Support Black and Community Banks Introduced

February 5, 2019

Congressman Bobby Rush (D-Il)

 

New federal banking legislation,"H.R.41 - RESCUE Act for Black and Community Banks" was introduced by Congressman Bobby Rush (D-Il) on January 3, 2019. 

Creative Investment Research partnered with the Financial Services Innovation Coalition to draft this new legislation. The bill is designed to take a focused approach to saving and expanding the number of Black-owned banks operating in the US to meet the needs of the Black community, not just serve bankers. 


The bill, which has just started the legislative approval process, contains the following provisions: 

1. Establishes in the Office of the Comptroller of the Currency an office to be known as the "Office of Black and Community Banks". 
2. Seeks to partially or completely exempt Black banks and community banks from Federal banking statutes and regulations, to the extent the Comptroller determines it appropriate without endangering the safety and soundness of such banks. 
3. Seeks to have the Securities and Exchange Commission issue regulations to reduce the regulatory burden applicable to Black banks and community banks— 
(i) under the amendments made by the Jumpstart Our Business Startups Act; 
(ii) issuing mortgage-backed securities; and 
(iii) issuing securities backed by loans guaranteed by the Small Business Act. 
4. Provides a crowdfunding exemption for Black and Community Banks under the JOBS Act. 
5. Reestablishes the federal Minority Bank Deposit Program. 
6. Expands federal agency use of Black and community banks. 
7. Gives specific consideration under the Community Reinvestment Act (CRA) for majority institutions that partner with Black and community banks. 
8. Calls for a study on the use of New Markets Tax Credits by Black an community banks. 

Community banks in general and black banks in particular, have suffered in the decade since the great recession. Black banks have almost become extinct with barely 20 banks left. These declines have had especially devastating effects on black communities. Black home-ownership is less now than it was in 1968, and black wealth is unchanged over that same period of time, with some predicting black wealth will be zero by 2053. 

African Americans are excluded, with the exception of token representation, from owning regulated institutions in the financial services industry, without access to the prosperous and dynamic activities of banking, venture capital and investing. The combined assets of all black banks were less than $6 billion as of 10/31/18 according to the Federal Reserve Board. It is well known that less than 1% of Venture Capitalists money finds its way to minorities and women. This is evident by the small size of black banks as compared to their non-minority counterparts. Wells Fargo [for example] has $11 trillion in assets. In fact, the 600th richest person in the world is worth over $5 billion and the 10th richest VC firm is worth roughly $5 trillion. 

To see the full text of the bill, visit: 
https://www.congress.gov/bill/116th-congress/house-bill/41

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