There’s a little-known story about the former U.S. Senator William Proxmire who once got into a squabble with federal banking regulators while he was chair of the Senate Banking Committee, in the mid-1970s.

Proxmire wrote to the regulators insisting they already had the authority under existing banking laws to require banks to lend wherever they took deposits, instead of just taking deposits from some neighborhoods while never lending in those neighborhoods. Back then, as now, banks often took deposits from Black neighborhoods while denying loans to residents and businesses in those neighborhoods.

Senator Proxmire believed that since a banking charter is actually a license to create money in the name of the U.S. government, banks had a special obligation to use that license for public good. Banks create money whenever they make investments or make loans. Funds show up instantly in borrowers’ deposit accounts, which then get exchanged between accounts at that bank or between accounts at different banks. Most money in circulation today and for many decades has been simply accounting entries in bank records, not actual hard currency — economists sometimes call it “checkbook money.”

When bank regulators refused to use the authority Proxmire believed they already had, he came to support a proposal from community organizers across the country, led by Chicago’s Gail Cincotta, which eventually became the Community Reinvestment Act of 1977. Meant as a redlining counter-measure, the CRA requires banks to meet “the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution.”

Every two to five years, banks have to undergo a CRA evaluation — essentially an audit by federal banking regulators to see how well they are meeting the terms of the CRA. This month, the Office of the Comptroller of the Currency, one of three federal agencies responsible for enforcing the CRA, released 16 CRA evaluations including small banks like First National Bank of Brookfield in Illinois with around $262 million in assets, as well as Capital One with $329 billion in assets.

A failing grade could mean a bank would be denied permission to open or close branches or merge with or acquire another bank. But that hardly ever happens. Federal regulators typically approve 400-500 new branch applications per year, and 200-300 merger applications per year.

Still, there’s a lot to learn from what’s in banks’ current CRA evaluation documents, as well as what they leave out. Since it just came out, Capital One’s CRA evaluation is a good example to use.

The first thing that comes up in Capital One’s CRA evaluation is its overall rating. Banks can get one of four overall ratings: Outstanding, Satisfactory, Needs to Improve and Substantial Noncompliance. The latter two are considered failing grades.

Capital One got an “Outstanding” overall rating for this evaluation. But overall ratings have long been rendered mostly meaningless. Historically, around 98% of banks have passed their CRA evaluations every year. The National Community Reinvestment Coalition has long advocated for “more nuance” in CRA ratings — and you can see in the chart above how regulators have started nodding to the need for more nuance, given the five performance levels for the different areas examined within the evaluation.

This evaluation of Capital One’s CRA performance covers the calendar years of 2017, 2018 and 2019. That’s another problem evident with current CRA evaluation — it’s based on past performance, and it typically takes more than a year after the evaluation period for regulators to release the evaluations. Even banks have told regulators they don’t like how long this lag is, claiming they might have already instituted changes to improve their performance by the time regulators release a failing grade.

A summary of the evaluation team’s factors in support of Capital One’s “outstanding” rating follows, including their impressions of various products and programs that Capital One has instituted to reach low- and moderate-income communities. The evaluation mentions a first time homeownership program that “featured low down payment requirements without private mortgage insurance, down payment assistance grants, consideration of nontraditional credit history, and homebuyer education,” benefiting 256 homeowners who borrowed a total of $47.5 million. Examiners also credited Capital One with 316 loans guaranteed by the Small Business Administration, totaling $221 million.

Two evaluation sections later is the “description of institution,” which starts to deliver some important context, such as where the bank’s branches and ATMs are located, and what percentage of those are in low-to-moderate income areas (CONA stands for “Capital One, National Association,” the legal name for Capital One.):

As of December 31, 2019, CONA operated 462 retail banking branches with 135, or 29.2 percent, of those branches located in LMI geographies. Additionally, CONA operated 39 cafés with six, or 15.4 percent, of the cafés located in LMI geographies. The cafés are not licensed branches, but they have deposit-taking Automated Teller Machines (ATMs). In locations without branches, CONA considers the cafés to be digital markets for purposes of distributing banking products and services. The cafés are staffed by CONA personnel who are available to provide financial education, introduce consumers to the bank’s products and services, and help customers apply for credit, open new accounts, and manage existing accounts digitally.

CONA’s number of deposit-taking ATMs increased by 516 during the evaluation period from 1,595 (at 810 locations) to 2,111 (at 1,078 locations) with 618, or 29.3 percent, of the period-end ATMs located in LMI geographies. Expansion of CONA’s relationship with Target Corporation accounted for most of this increase. CONA now has 535 deposit-taking ATMs in Target store locations. The Target ATMs have resulted in the addition of 33 counties and 14 AAs at the Metropolitan Division (MD)/Metropolitan Statistical Area (MSA) level to CONA’s footprint.

So the bank is certainly taking deposits from low- and moderate-income communities, given it has about a third of its branches and ATMs in those communities. But that also means two-thirds of its branches (and ATMs) are in wealthier communities. Branches can be an indicator of where a bank focuses most of its time and effort making loans — but there is data later in the report revealing more about that. (You might also note, however, that the bank has been partnering with Target to host its ATMs, and Target is currently under fire for a wave of store closures in Black communities.)

The seventh and eighth paragraphs of the “description of institution” reveal some very important bits of overall context:

As of December 31, 2019, CONA reported total assets of $329.0 billion, deposits of $256.8 billion, and tier 1 capital of $28.4 billion.

…As of December 31, 2019, CONA’s loans and leases totaled $161.2 billion, representing 49.0 percent of total assets. The composition of the loan portfolio consists of approximately 51.4 percent of loans to individuals, 19.4 percent real-estate loans, 17.5 percent commercial loans, and 11.6 percent loans to other banks, non-depository institutions, and states, U.S. political subdivisions, and similar entities. Farm and agricultural loans comprise a very small percentage of the loan portfolio.

A banking charter is a license to create money, primarily by making loans to people or for starting, running or growing a business. But only 49% of Capital One’s assets are actually loans. What’s the bank doing with the majority of its money creation power? You can’t find that here.

But you can find it elsewhere. The FDIC, which insures bank deposits, collects financial information from banks on a quarterly basis, including balance sheets and income statements. The compiled documents from each bank is known as a “call report,” and every single bank’s quarterly call report is publicly available from the FDIC as well as the Federal Financial Institutions Examination Council, an inter-agency group for federal banking regulators.

According to Capital One’s call report for December 2019, the endpoint of Capital One’s most recent CRA evaluation, in addition to $160 billion in loans, the bank’s portfolio contained $342 million invested in the stock market, $361 million invested in overseas bonds, $808 million invested in the U.S. corporate bond market, $74 billion deposited at other banks, and $64 billion invested in U.S. government bonds. When the bank creates money to make these other investments, it’s mostly buying them from other investors — so all the new money created goes to investors but doesn’t go directly to the companies or the government that issued the bonds.

It’s typical for banks to invest some of their assets in stock markets and bond markets, and even to deposit funds at other banks. It’s part of diversification, the standard practice investors use to manage risk. Stock markets are considered the riskiest form of investment, and can also reap higher returns than loans or bonds. Bonds are less risky than stocks. U.S. government bonds are the lowest risk, lowest return for investment. In terms of risk, for banks, loans as a group are somewhere in between bonds and stock markets.

But a bank charter is not a license to create unlimited amounts of money — banking regulations limit banks to around $11 in money creation power for every $1 in equity or shareholder capital. So every dollar a bank invests in the stock or bond market is a dollar that can’t be used for a loan.

Overall, Capital One made most of its income from interest on bank loans, and bank loans collectively outperformed other investments. Based on data in the bank’s call report, for every dollar of loans in its portfolio, Capital One earned six cents for the year in 2019; for every dollar in other investments, it earned just three cents. So why not have more of its overall portfolio in loans? It’s an important question, but it’s not one that is currently considered on CRA evaluations.

What CRA evaluations do consider is data on who the bank is lending to, and how that compares with the income distribution of the areas where it does business. Other demographic factors, like race or gender, aren’t considered. The CRA itself does not mention race or gender as factors regulators must consider, but nor does it rule that out. Racial justice and fair housing groups have spent decades calling for CRA rules to consider race and gender, and regulators have considered it in the past as well as more recently.

CRA evaluations break out into sub-ratings of metros and states where the bank tells regulators it does business. For this CRA evaluation of Capital One, regulators rated three metros (NYC, Philadelphia and DC-Baltimore) and a dozen states. Each metro or state sub-rating includes a “community contact” section, which provides notes from regulators’ discussions about credit needs for that metro or state with unnamed community representatives from that metro or state.

For this CRA evaluation, Capital One’s most important sub-rating was for the New York area, representing $67 billion in deposits at the bank.

As part of the CRA evaluation, the OCC reviewed information from four community contacts within the New York CSA AA to determine local economic conditions and community needs. Contacts were completed with representatives of organizations that focus on affordable housing, small business development, community services, and policy and research. The contacts noted the need for affordable housing programs, both homeownership and rental housing, due to the high-cost areas across the AA. Affordable rental housing is particularly necessary in high-cost metropolitan areas such as New York City, where two-thirds of its residents remain renters. Often these renters experience a high rent burden, which impedes the ability to save for a mortgage down payment. Multifamily lending is also a need in these areas, many of which experienced gentrification during the evaluation period.

…For small businesses, there is an increased need especially for small-scale businesses that struggle most to access capital. In the high-cost areas across the AA, it is difficult for businesses to survive due to rising commercial real estate leases and large chains entering the local retail markets.

In terms of whether Capital One is or isn’t including low- and moderate-income communities in its lending, the bank could do a lot worse. In the New York area, low- and moderate-income families are overrepresented in the bank’s home mortgage lending while upper-income families are underrepresented. For small business loans, borrowers in low- or moderate-income census tracts are also overrepresented in the bank’s lending while small businesses in upper-income census tracts are underrepresented. You can start to see why regulators might be convinced that the bank’s CRA overall performance warranted an “outstanding” rating.

But then again, all of Capital One’s lending represents only 49% of the bank’s money creation power — and that figure came right from the document. Among the top 25 largest banks, Capital One at 49% is about average in terms of using its money creation power to make loans to people or businesses, and that includes loans to big corporations or wealthy individuals that don’t count on a CRA evaluation.

By contrast, small banks typically have 70% or more of their assets in loans. How many more small businesses or first-time homeowners in low-income neighborhoods might big banks reach if their percentages were closer to 70 rather than 50? (Check out Mighty, a financial technology company that pulls data from banks’ call reports, for more user-friendly displays of what’s in the portfolios of every bank as well as every credit union across the U.S.)

There’s many factors that go into why big banks don’t use their money creation powers to make more loans as opposed to other investments. Some factors are internal, like whether a bank is set up organizationally to emphasize home mortgage or small business lending as opposed to lending to larger businesses or buying and trading stocks or bonds.

Some factors that limit bank lending in certain communities are external to banks, like the relative lack of friends and family wealth in low-income and especially Black and Latino communities — funding that can serve as a precursor to larger loans from banks. Even small banks, including Black-owned banks, have challenges in overcoming the lack of friends and family wealth in their communities.

Racist practices in real estate appraisals also limit the ability of both big and small banks to lend in low- to moderate-income communities, especially in Black communities where real estate is undervalued simply because it is associated with Black people. The current acting Comptroller of the Currency recently acknowledged publicly what others have been saying about racism in appraisals for years.

It’s getting worse — in Chicago, WBEZ found that disparity in home values between white neighborhoods and Black and Latinx communities has increased more than sixfold since 1980. Lower home values make it especially challenging for families to rehab homes in Black neighborhoods, where homes may need more rehab than a bank can finance based on the market value of the home.

Imperfect as the CRA is, on paper or in practice, CRA evaluations do contain enough information to see that even if a bank does do a relatively good job of including low- and moderate-income communities in its lending, as Capital One does, it may still not be lending enough to meet all the credit needs it could possibly meet. And while you can’t lay all blame or credit on the individual bank, CRA evaluations can help to start a more informed conversation.

This post was originally published on Next City.