The announcement is significant in light of decades of failed federal government policies to increase minority and low-income home ownership. As I have discussed before, despite 40 years of government programs and subsidies, the racial homeownership gap has barely improved. In 1976, 44 percent of African-American families and 43 percent of Hispanic families owned their own home. By 2016, Hispanics improved 3 percent and African Americans fell by 2 percent.
The Community Reinvestment Act is one such example, which forces banks to make loans to residents of low- and moderate-income neighborhoods. Fannie Mae and Freddie Mac, the two government mortgage behemoths that purchase home loans from lenders to support the market, are another. This government meddling in housing policy helped fuel the housing bubble that lead to the 2007-2008 financial crisis. Fee market reforms are now proving a more effective means of achieving the goal of expanding home ownership.
JP Morgan plans to increase community investments by 40 percent over five years; mortgage lending to expand homeownership in low- and moderate-income communities by 25 percent; and small business lending by $4 billion. The bank attributes the increase to “the firm’s strong and sustained business performance, recent changes to the U.S. corporate tax system and a more constructive regulatory and business environment.”
My CEI colleague Trey Kovacs has already outlined how tax reform has already achieved what the union-backed “Fight for $15” movement promised, with numerous companies raising wages beyond $15 an hour. Now it seems that tax reform and deregulation are achieving what decades of federal government policy could not—lending and investing in low-income communities to advance economic opportunity. Imagine what could be achieved if Congress and the White House put their efforts behind substantial financial reform.