The Bottom LineThe Bottom Line

Economics in Brief: Top Bank Regulator Presses Pause on Controversial Overhaul of CRA Rules

Also: A deal to give NY gig workers collective bargaining rights; and California earmarks $35 million for guaranteed income programs across the state.

Federal Reserve HQ in Washington, D.C.

The Federal Reserve (Photo by AgnosticPreachersKid/CC BY-SA 3.0).

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Top Bank Regulator Presses Pause on Controversial Overhaul of CRA Rules

The Office of the Comptroller of the Currency, which regulates most of the nation’s banking system, announced on Tuesday it was pausing implementation of new regulations under the Community Reinvestment Act, or CRA. Passed in 1977, the act was intended to help counteract redlining and other discriminatory lending policies and practices that denied access to capital for low-income communities, particularly Black and immigrant communities.

The Office of the Comptroller of the Currency shares responsibility for CRA enforcement with the Federal Reserve and the FDIC, both of which rejected the Comptroller’s changes last year. The changes would have resulted in two sets of CRA rules for different parts of the banking industry. That scenario is now unlikely. Consumer advocates, community development organizations, fair housing groups and even the banking industry applauded the move by the Comptroller’s office, with universal agreement that there should only be one consistent set of rules and regulations under the CRA.

The Federal Reserve is currently undergoing its own overhaul of CRA rules, and both the FDIC and the Comptroller have the option to join the Fed and keep all three agencies under one set of rules.

As Next City has covered over the past four years, since Trump’s first days in office, officials in his administration talked about overhauling the rules and processes used to enforce the CRA. Those rules and processes hadn’t been updated since 1997; and the banking industry has endured many drastic changes in the interim. Technological advances have changed how consumers bank, and there are just under 5,000 banks operating today compared with around 10,000 in the mid-1990s.

But the Trump Administration’s choice for Comptroller of the Currency was someone under investigation for violating anti-redlining rules — Joseph Otting, previously CEO of OneWest Bank. The bank agreed to a settlement to end the investigation in 2019. Throughout the multi-year overhaul process, community advocates confronted Otting in city after city to explain how his agency’s proposed rules changes would result in less, not more lending to benefit low-income and formerly-redlined communities. Even some banking professionals weren’t sure the changes proposed under Otting would be good for low-income communities. The Comptroller’s office finalized its changes in May 2020, clearly ignoring key points of feedback from consumer groups, community groups and local public officials.

But, a little over two weeks after the Biden Administration named Michael Hsu acting Comptroller of the Currency, that national banking nightmare is just about over.

A Deal to Give Gig Workers Unionization Rights, But Not Employee Status?

In New York State, a labor union has negotiated a deal to allow gig workers to unionize, but it comes with an apparent catch — the legislation would stop short of classifying gig workers as employees, instead codifying them as independent contractors.

The deal, first reported in Bloomberg, was negotiated by the Transport Workers Union with state legislators in Albany. The new proposal would allow app-based workers to vote to form unions. The unions would then engage in “sectoral bargaining” with companies to hammer out standards governing an industry, such as app-based ride hailing. The new rules would take the form of recommendations to the state, which could then approve and enforce them.

Transport Workers Union President John Samuelsen told Bloomberg he has talked with representatives of gig delivery and transportation companies and said he is confident they will not oppose the legislation.

But there is a catch. As THE CITY reports, since the workers won’t have employee designation under the measure, it would be up to the state to approve and impose any collective bargaining agreement. The proposal would also preempt local governments from imposing some forms of regulations on the apps.

Speaking to THE CITY, Bhairavi Desai, executive director of the Taxi Workers Alliance, which represents cab and app-based drivers, slammed what she saw as labor “compromising” with tech giants hungry to undercut regulations being floated at the federal level.

“I think that at this point, this is about a national strategy by Uber and Lyft to actually undermine — and to get a carve-out for themselves — from the PRO Act,” Desai told THE CITY.

Meanwhile in New York City, the Drivers Cooperative, a driver-owned ride-hailing app that Next City covered earlier this year, is now allowing users to download its app — though it’s not advertising that it is fully operational just yet, as it continues to onboard new drivers.

California Governor Wants to See More Guaranteed Income Pilots

California Governor Gavin Newsom announced last Friday that he is including $35 million in funding in his May budget proposal to state legislators that will go to guaranteed income pilots targeting low-income Californians. Local TV news KCRA said it’s believed to be the first statewide funding in the country for such programs.

The news came not long after Mayor Ras Baraka announced a guaranteed income pilot program for his city of Newark, New Jersey — which will be all-privately funded instead.

The idea, supporters of these programs say, is for the pilots to help build compelling evidence for a federally-funded guaranteed income program. Another goal is to figure out how to best structure the program so it affords the necessary flexibility for states and localities to customize as they see fit.

“[The federal government is] printing money, so the idea is the money is there, but the will is not there,” said Baraka in an online event on guaranteed income last year. “They’re finding money somewhere, giving it out, and arguing about who gets it. We’re saying this is where it needs to go, and we want them to understand it needs to be in perpetuity, not just a one-off thing.”

Oops, They Did It Again

Two years ago, banking giant JPMorgan Chase committed to no longer finance private prisons. And yet, here we are.

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter.

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Oscar is Next City's senior economic justice correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha and Fast Company.

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Tags: californiaunionsnewarkuniversal basic incomecommunity reinvestment actgig economy

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