Is “Regulation from Below” Possible?

A powerful grassroots movement campaigned in the ’70s and ’80s for banks to reinvest equitably in red-lined urban communities. It failed—but why?

How do the people exercise power? For West Side Chicago residents in the 1960s who were part of Organization for a Better Austin (OBA), the exercise of power needed to be opportunistic and confrontational. To pressure banks to reinvest in their community, they took action: they scattered hundreds of pennies in the lobby of a bank lender, so as to disrupt business,1 and they surrounded a blockbusting real estate agent in the basement of a house until the agent promised to take his business out of the neighborhood.

These were among the hundreds of actions, negotiations, and persistent efforts the OBA undertook, along with subsequent federated organizations under the National People’s Action on Housing (NPAH, later dropping “on Housing”) coalition, that led to the eventual passage of the Home Mortgage Disclosure Act (HMDA) in 1975 and the Community Reinvestment Act (CRA) in 1977. These two acts are considered the dual federal legislation responsible for reversing decades of bank redlining practices in the United States. They remain imperfectly enforced.2 Moreover, they are in need of updating to meet the realities of the contemporary mortgage market: for example, 60 to 70 percent of loans are issued by mortgage brokers not subject to the CRA. Nevertheless, the HDMA and the CRA remain central policy instruments for regulating fair access to credit for low- and moderate-income neighborhoods.

That the two acts directly originated from community organizing is distinctive in the history of 20th-century housing and urban development. This is because, for decades, regulation and practices were largely steered by the economic incentives of the ecosystem of private and government actors, legislatures, and institutions. Neighborhood investment flowed in the direction of property value ideologies: profit, it was believed, was created through new construction and maintained by a hierarchy of race, ethnicity, and class homogeneity.

Instrumental to diverting resources away from older, more diverse city neighborhoods and toward newly constructed single-family subdevelopments in the suburbs were powerful trade associations, such as the National Association of Real Estate Brokers (NAREB). For instance, the NAREB included a clause in its 1924 code of ethics that forbade members of races or nationalities “whose presence will clearly be detrimental to property values in that neighborhood”; this prohibition, of course, was then reflected in mortgage credit evaluation practices.

But it was not only such private actors. In fact, federal agencies such as the Housing and Home Finance Agency (HHFA)—the precursor to the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA)—were also motivated by self-preservation and expansion.3 In the 1950s and 1960s, for example, the HHFA disregarded nondiscrimination and relocation requirements for slum clearance. Meanwhile, the FHA—which was designed as a profit-making enterprise to stem the economic downturn during the Depression—focused on subsidizing credit in suburban subdevelopments. The agency justified that bias by claiming such a focus minimized the default risk in its own portfolios.

Against this landscape of public-private profit taking, at the cusp of bank deregulation in the late 1970s and early 1980s, Rebecca Marchiel’s deeply researched After Redlining (2020) recounts how Chicago community organizers such as Gale Cincotta, Shel Trapp, and the NPA built power to ultimately usher in and repeatedly reinforce legislation for bank-led reinvestment.

“Regulation from below,” as Orin L. McCluskey terms it,4 was achieved through fighting racial steering and blockbusting in Chicago’s Austin neighborhood, expanding into a national movement with the common interest of neighborhood reinvestment, acting as vigilant grassroots financial oversight in the recognition that there exists a wide gulf between legislation and implementation, and maintaining pressure on key legislative actors through direct action. The NPA went on to challenge the structural harms of FHA inner-city financing practices and work with municipal, state, and national legislators toward affirmative action for older urban neighborhoods. But, as Marchiel concedes, it was not enough.

What are the consequences of this particular path of grassroots organizing around the place-based logic of “financial common sense”? More important, what lessons about the process of community organization are we to take from the NPA, especially in the current era of housing insecurity and the deepening financialization of housing? Marchiel’s narrative paints the picture of a remarkably powerful national reinvestment campaign against an almost unstoppable force of ever more inventive flows of capital. Perhaps the lesson should have been that capitalism refuses to work for people.

The main tension in this history is between, on the one hand, the politicizing and unifying power of place and, on the other hand, the growing dispersion of finance capital. This tension, according to Marchiel, begins with the fraying of mutual dependence between neighborhood residents and their local savings and loan (S&L) associations.

An S&L was granted a public charter within a 50-mile service area, which implied a social agreement of local lending and local borrowing. This spatialized social agreement physically tying banks to local borrowers is the core logic of the “financial common sense” Marchiel employs to explain the demands of the OBA and later the NPA. The reasoning of these grassroots organizations was that, given the public benefits local banks received through their charter, such as federal government deposit insurance, they had a public responsibility in turn to serve neighborhood residents. But this agreement between lending and borrowing at the local level eventually broke down.

This loosening is evident in the initial data from HMDA, which required banks to report the geographic distribution of their loans. Consider the actions of two Baltimore banks: Marchiel describes how they loaned to one West Side neighborhood only a total of $100,000 but loaned $2.6 million in a wealthier, nearby neighborhood.

The decoupling of the geographies of banking occurred in parallel with the move by white residents to the suburbs. Together, they signaled a shift in the behaviors of credit-making institutions.

“Rub raw the sores of discontent,” said Saul Alinsky, describing the necessary tactics for building community organizations.5 Community organizing in the mid-20th century is Chicago-style organizing, largely defined by Alinsky’s philosophy. He argued that power is created and sustained by citizen involvement in concrete, shared interests, which motivate direct action. This belief, when coupled with the city’s history as the site of prominent racialized housing issues, made Chicago fertile soil to grow a strong organizing apparatus.6

And so, Alinsky acolytes like John Egan began organizing in Chicago’s Austin neighborhood in the mid-1960s. Egan seized on the collective anxiety of neighborhood deterioration while smoothing over race and owner-renter divides. Together, these formed the energy from which an organization like the OBA emerged. Importantly, this was a concentrated fight, focused on place-based neighborhood access to credit. This contrasted with other attempts to organize around national issues of civil rights and racial inequality.

In contrast to the Alinksy style of organizing around place, Marchiel names prominent organizations such as the Southern Christian Leadership Conference (SCLC) and Jesse Jackson’s Operation PUSH as examples of attempts to coalesce power around broader equity principles. A fuller contextualization of the organizing landscape in the West Side of Chicago and general strategies for success would have described what was perhaps more immediate on the minds of the Austin organizers: the notable foundering of the “open housing” campaign by the SCLC’s 1966 Chicago Freedom Movement, which called for housing desegregation. The campaign, based in neighboring Lawndale, was prominent for the scale of its campaign outside the South and for its inadequacy. As Beryl Satter notes in Family Properties (2009), the SCLC’s ever-changing proposals for reform drawn from a broader pursuit of justice ultimately fell incongruously with the material needs of Lawndale residents.

Just as Akira Drake Rodriguez highlights the role of Black women in coalescing tenant organizations in her book Diverging Space for Deviants (University of Georgia Press, 2021), of note in After Redlining is the crucial participation of women. Not only was Gale Cincotta the assertive heart of the reinvestment movement—once threatening to nail a “Loan Shark” sign on the door of the Federal Reserve in Washington, D.C.—but women, as primary caretakers of the family during this time, were the most consistent participants in the OBA’s efforts toward neighborhood improvement.

Reinvestment activists believed that places had social value as opposed to market value.

The economic Depression in 1929 catalyzed a housing market crash and widespread bank failures. In its wake, two channels of residential mortgage finance expanded, within governmental frameworks, for the purpose of economic growth and housing construction. First, S&Ls, which had been an important institution for local home loans before the Depression, now had new support and supervision from the Federal Home Loan Bank Board (FHLBB) starting in 1932. Second, banks, insurance companies, and other private lenders could now also offer attractive interest rates, which were insured with FHA and Veterans Affairs loan guarantees in the event of default.

These twinned expansions of finance constructed the beginning of what we now know as the modern mortgage market. And it was in this first period, between the 1930s and the credit crisis in 1966, that S&Ls were established as trusted mortgage lenders in communities. However, the constraints of their geographic specialization—coupled with the duration mismatch of long-term, fixed-rate lending and short-term borrowing typical of deposits—created vulnerabilities in the viability of this institutional form.7

Such vulnerabilities began to manifest in the subsequent decade, as inflation and volatile interest rates challenged S&Ls to diversify and widen liquidity. This challenge came alongside new inventions: newer types of loans, such as the adjustable-rate mortgage, and the creation of the secondary mortgage market in 1968.

Marchiel is sympathetic to how S&Ls perceived and responded to these economic strains. Even so, she stresses the difficulty of disentangling such impacts from property-value ideologies, which also disincentivized lending in urban neighborhoods.

Having showcased the internal dynamics of S&Ls, Marchiel nonetheless foregrounds what activists like the OBA were fighting for. These reinvestment activists believed that places had social value as opposed to market value. She describes the NPA’s grassroots work in documenting redlining practices, pressuring FHLBB for lending disclosure, and protesting when banks failed to submit HMDA data on time.

Things changed after 1977 with the passage of the CRA, which required banks to lend where they took deposits. Now it was enforcement—not activist pressure to pass legislation—that was assumed to be the main responsibility of community organizers, who had demonstrated themselves to be skilled grassroots financial regulators from below with local knowledge of lending behaviors.

But how strict should the localization of lending be? If social value and market value are necessarily in opposition, how should the access to credit, housing, and social life ideally be restructured? Ultimately, was the notion of “financial common sense” truly common sense given the increasingly global nature of mortgage markets?8

While the avoidance of these types of questions that pose systemic challenges may have been a useful strategy to sustain organizing, hindsight tells us that the strategy of tying affirmative action reinvestment to local markets was ultimately too narrow. Marchiel alludes to, though is not directly critical of, this strategy. Bank deregulation, as well as the expansion of new circuits of housing finance, ultimately hastened the decline of the S&Ls.9

In fact, modern community lending has never been local, at least not in the way that grassroots activists wanted to understand it. They assumed that credit markets should maintain the spatial dynamics as they knew it, but this assumption was already at odds with the redistributive practices—though unevenly stratified by race and class—established with the creation of the FHA/VA in the 1930s. The federal balance sheet was deliberately used to subsidize local development.

The multiscale character of credit markets expanded with the move toward deregulation of the banking and finance sector. Deregulation both was a response to and resulted in the destabilization of institutions like the S&Ls and local community relationships. In particular, the broadening of secondary mortgage markets and the creation of mortgage-backed securities in 1968 created a financial lubricator that, through new institutional investors, dispersed place-specific mortgage risk globally.10

Yet diversification does not always need to be extractive of the most vulnerable. More intentional and regulated dispersion of risk could be a two-way street: savings from wealthier neighborhoods could be reinvested in lower-income neighborhoods.11 What other redistributive possibilities were foreclosed in this moment? Marchiel acknowledges the role that deregulation and, later, financialization had in undermining the work of the reinvestment activists. But, even so, framing the narrative more centrally within larger structural challenges and its consequences for the present day may help us understand the potential or the limitations of grassroots organizing at the time.

Nevertheless, no urban history of financial institutions and monetary policy that describes, for instance, the vital revisions and restrictions of Regulation Q—which controlled interest rate ceilings for deposits and the nature of competition between S&Ls and commercial banks—has ever been so exciting. Marchiel has written an important history that not only portends contemporary financialization but also offers a glimpse into the tactics and strategies to challenge it.


This article was commissioned by Sophie Gonickicon

  1. Jean Pogge, “Reinvestment in Chicago Neighborhoods: A Twenty-Year Struggle,” in From Redlining to Reinvestment: Community Responses to Urban Disinvestment, edited by Gregory D. Squires (Temple University Press, 1992).
  2. Dan Immergluck, Credit to the Community: Community Reinvestment and Fair Lending Policy in the United States (Routledge, 2016).
  3. Mark I. Gelfand, A Nation of Cities: The Federal Government and Urban America, 1933–1965 (Oxford University Press, 1975).
  4. Orin L. McCluskey, “The Community Reinvestment Act: Is It Doing the Job,” Banking LJ, vol. 100 (1983), p. 33.
  5. Quoted in Beryl Satter, Family Properties: Race, Real Estate, and the Exploitation of Black Urban America (Metropolitan Books, 2009), p. 119.
  6. For details, see Chicago Reader, A Look Back at Chicago’s Public Housing, 2016,; Arnold R. Hirsch, Making the Second Ghetto: Race and Housing in Chicago, 1940–1960 (Cambridge University Press, 1983); William J. Wilson, The Truly Disadvantaged: The Inner City, the Underclass, and Public Policy (University of Chicago Press, 1987); and Edward G. Goetz, New Deal Ruins: Race, Economic Justice, and Public Housing Policy (Cornell University Press, 2013).
  7. Michael J. Lea, “Innovation and the Cost of Mortgage Credit: A Historical Perspective,” Housing Policy Debate 7, no. 1 (1996).
  8. David Harvey, “The Urban Process under Capitalism: A Framework for Analysis,” International Journal of Urban and Regional Research 2, no. 1–3 (1978),
  9. Lea, “Innovation and the Cost of Mortgage Credit.”
  10. Robert A. Beauregard, “Capital Switching and the Built Environment: United States, 1970–89,” Environment and Planning A 26, no. 5 (1994).
  11. Immergluck, Credit to the Community.
Featured image: Neighborhood on Chicago's West Side — June 1973, Records of the Environmental Protection Agency / National Archives and Records Administration (CC0 1.0).