Tuesday, March 14, 2023

Rebuild Local News Coalition asks regulators to reward banks' support of local news with Reinvestment Act scores

The effort to shift government policies to help local news survive has a new tack: asking federal regulators to give banks better Community Reinvestment Act evaluations if they lend to news outlets.

The pitch is made in an opinion piece for American Banker by Steven Waldman, founder and CEO of the Rebuild Local News Coalition, and one of his board members, Julie Sandorf, president of the Charles H. Revson Foundation. They argue, "Community news organizations are often integral to the vitality of a community. Studies, and common sense, have indicated that communities that lack good local news have less civic involvement, more corruption, higher taxes and lower voter turnout. So, isn't it about time for the government to encourage banks to treat local news as an essential community service?"

Waldman and Sandorf note that banking regulators are considering changes to regulations governing the CRA, which Congress passed in 1977 to remedy the discriminaton against low- and moderate-income communities, and said a bank has an obligation to "meet the credit needs of its entire community." Regulations enacted in 1995 require CRA performance reviews to consider banks' responsiveness to needs for community investment and community development.

"CRA incentivized banks to join forces with the public sector and philanthropy to create new credit and investment products that have, in turn, leveraged tens of billions for such essential community infrastructure as affordable housing, small business development, primary health and day care centers and food markets. It has spurred the establishment of 'mission driven' lenders, such as community development financial institutions, which specialize in financing investment in the unique needs of underinvested communities and businesses.

"But these investments become far riskier when there are not good, reliable sources of information for residents and civic leaders — and reporting that holds politicians and institutions accountable. Banks might get CRA points for lending to a low-income housing project. But if the housing project becomes inefficient or corrupt because no one is watching it carefully, what has been gained? Banks might lend to small businesses, but if those businesses have few ways to reach customers, they may struggle. Yet right now, many of the small media businesses that serve low- and moderate-income communities are struggling mightily — and getting little help from local banks."

So, a coalition of local news organizations have asked the Federal Reserve Board, the Comptroller of the Currency and the Federal Deposit Insurance Corp. to make what they call "some relatively minor changes that could have a major impact on the health of community news." And right now, banks need encourgement to lend to news organizations, Waldman and Sandorf write.

"Many local newsrooms are so focused on keeping the lights on that they do not have the capital to invest in the revenue-producing steps that could help them survive or thrive," they write. "Many local newsrooms have trouble financing the changes they need to make. Big-time venture capitalists view local news as not 'scalable.' Hedge funds buy newspapers but end up gutting them instead of investing in them. Banks — especially those focused on serving low- and moderate-income communities — have been mostly on the sidelines. We desperately need them to step forward."

The news organizations made these specific recommendations to the banking regulators: Make clear that certain types of local news — provided by small businesses for low- and moderate-income communities — count as "community supportive services," just like "educational services" do now. "Regulators should make it clear that educating residents on civic matters through local news should count as educational services," Waldman and Sandorf write. Also, "Banks should advertise more in local news outlets. The law already requires that banks make their products and services known to residents of low- and moderate-income communities. Doing some of that marketing through local media will help them promote their services while simultaneously strengthening the local news that can, in turn, strengthen the community."

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