What Wall Street banks and Sen. Warren have in common
© Greg Nash

According to the Federal Financial Institution Examination Council, the Community Reinvestment Act is “intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound banking operations.”

This law was enacted in 1977 because banks were redlining – that is, they were refusing to lend money or extend credit to borrowers in certain geographic areas. It was a necessary step to address lending discrimination.

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Forty years later, Wall Street banks and Sen. Elizabeth WarrenElizabeth Ann WarrenBiden leads crowded field of Dems in potential 2020 matchup: poll Trump attacks Democrat in Ohio governor's race Warren responds to 'arrogant woman' insult: 'Was I tough on John Kelly? ... You bet I was' MORE (D-Mass.) have forged an unlikely alliance. They want this legislation to cover not-for-profit cooperative credit unions, despite the absolute absence of evidence that credit unions are engaged in lending discrimination.

In fairness, Warren’s motive and those of the for-profit banking industry are probably very different. It is no secret that the banks would like to see credit unions eliminated from the market altogether, and they have long supported extending CRA to credit unions as one of several steps toward that end. Warren, on the other hand, has longstanding relationships with credit unions in her state, and supported expanding credit unions’ ability to extend mortgage credit for non-owner occupied residential properties. We must assume, therefore, that she would prefer credit unions lending to her constituents, as opposed to large banks and non-bank entities. We share and support this goal wholeheartedly.

The problem is that her solution, at least as it relates to extending the CRA to credit unions, represents a step backward in achieving additional access to affordable mortgage credit from reputable cooperative lenders like credit unions.

Credit unions have a statutory mission to promote thrift and provide access to credit for provident purposes. By statute, credit unions already operate to achieve the purposes of the Community Reinvestment Act. And, unlike bank holding companies, broker-dealers, investment and private banks—many of which cater exclusively to ultra-high net worth individuals and multinational corporations—credit unions are community-based financial cooperatives that exist as an important alternative to these profit-driven banking models, to offer pooled savings and lending services for member-owners. They serve only their members and the communities – geographic, workplace, faith-based, or educational - that they are formed to serve.

Any policymaker interested in achieving more credit union lending, as we honestly believe Sen. Warren does, should support eliminating statutory and regulatory barriers that limit access to credit unions as opposed to erecting new barriers that will be cheered by the banks and non-bank lenders she has fought so long to contain.

Applying the exact same standards imposed to remedy bad bank behavior is not only unfairly punitive to credit unions, which by their very structure cannot engage in the very practices the CRA was designed to prohibit, it is counterproductive to the very end that we believe Sen. Warren seeks to achieve.

Reams of data show how credit unions equitably and successfully serve their members. Credit unions deliver more than $15 billion in benefit to all consumers each year, vastly outpacing the highly-touted $12 billion the Bureau of Consumer Financial Protection has returned to consumers in the last five years. In the post-crisis period, credit union mortgage lending originations to low- and moderate-income borrowers have increased while banks have pulled back mortgage credit availability and unregulated non-bank lenders have aggressively entered this market.

Warren’s legislation has a laudable goal: to lower the burden of housing costs on American families. The provision to extend the Community Reinvestment Act to credit unions, however, is not only unnecessary, but works directly counter to this goal. A better approach would be for Warren and others interested in expanding access to credit to disavow the banker advocacy agenda and support statutory changes that allow credit unions to serve more Americans.

Ryan Donovan is chief advocacy officer of Credit Union National Association.