WASHINGTON, DC — Text of Congressman Jeb Hensarling’s Remarks on CRA:

I believe that the community reinvestment act has had a proud genesis 33 years ago.  In 1977, red lining was clearly not insignificant; too many low income and minority individuals’ credit opportunities were limited to a handful of banks that might have been reachable on a city bus route. Thirty three years later, much has changed.

Interstate banking, branch banking, internet banking, risk based pricing; all have helped revolutionize and democratize credit in our society as never before. If you can gain access to the internet at a public library, if you can have access to a telephone to call a toll free number, you can unlock countless credit opportunities that, again, for credit cards and home loans, were simply unavailable 33 years ago. Market competition from companies like lendingtree.com, bankrate.com, cardcom.com, and many, many others, now provide low-income Americans with a platform to access competitive bids and financial products all across the U.S., not just in localized geographic communities. In fact, the concept of a localized geographic community for banks is simply antiquated.

Now, unfortunately, the recession, not to mention the anti-consumer legislation, which has been passed by this Congress, continues to erode credit opportunities for many low-income Americans. That is regrettable, but it brings us to the great irony of this hearing.  Thirty three years ago, if you examine the Congressional Record, what you see is the debate surrounding CRA was all about discriminating financial institutions denying credit opportunities to low-income and minority individuals. Now today, much of the debate is about greedy financial institutions exploiting low-income and minority individuals by making too much credit available to these communities. So, it begs the question: is it too much? Or is it not enough?

Regardless of what CRA was, today it is a costly and redundant anachronism that has contributed to our economic crisis and still enables certain activist groups to essentially shake down financial institutions, harming credit and job opportunities for all Americans. Federal Reserve data has shown that well over 99% of all banks are already in full compliance of CRA, yet we know that community banks can spend up to $90,000 a year, just to prove compliance.

Again, it begs the question, are we simply having these banks pay all these great sums of money to prove that they are doing something that they would be doing anyway? Do you really have to force a bank to make a profitable, credit worthy loan? And if not, are we forcing them to make loans to a universe of people that they may not otherwise make? And these loans may not be financially sound loans. And indeed, they may be loans that helped contribute to our financial crisis. And when we talk about CRA loans contributing to the economic crisis, I have long contended that it wasn’t the size of the loans, it wasn’t the number of loans, but it was more the precedent where the United States government put its imprimatur on a system that did not raise up the economic opportunities of the borrower, but instead lessened the credit standards of the lender. Thus, it played a role.

Also, every community banker I speak to tells me that equal, or second only to BSA, CRA is the most costly compliance matter. If they simply had the money that they are spending on compliance cost, they would instead be able to capitalize several small businesses in their community, and create hundreds of jobs. Shouldn’t jobs be the number one priority of this Congress? Clearly it is not though. Under the policies of Speaker Pelosi and President Obama, almost 4 million of our countrymen have lost their jobs, since the President has been inaugurated. We have the highest unemployment rate we’ve had in a quarter of a century, not to mention a tripling of the national debt. One thing that our Committee could do, that would take a positive step towards creating more jobs in America, is simply to repeal CRA. Today, I’ll be introducing legislation to do just that, and I urge its consideration.