Congress passed the community reinvestment act cra in 1977. Whereas hmda proved that redlining was a reality, cra made it illegal. The speech was delivered at the confronting concentrated poverty policy forum at the board of governors of the federal reserve system in washington, dc on december 3, 2008. The community reinvestment act cra encourages bank lending in. The effectiveness of the community reinvestment act. Its legislative history and its impact on applications for changes in structure. This year marks the thirtieth anniversary of the community reinvestment act cra. Trump would weaken mandates on bank lending in poorer. But this law had no teeth, no way to require lenders to lower. Bank performance and the community reinvestment act cra of 1977. Sarkar b a bowling green state unicersio, department f finance, bowling green. One of the top lobbying groups supporting the community reinvestment act, a 1977 piece of legislation thats.
Understanding the basics of cra federal reserve bank of. Tuccille at reason notes, the federal government played a role in inducing, even strongarming, banks to take risks they otherwise would have avoided. Pdf bank performance and the community reinvestment act. This article is brought to you for free and open access by the school of social. Be it enacted by the senate and house of representatives. The community reinvestment act of 1977 is defined as a united states federal law designed to encourage commercial banks and savings associations to help meet the needs of the borrowers in all segments of their communities, including low and moderateincome neighborhoods.
Community reinvestment act of 1977 federal reserve history. National community reinvestment coalition, a 1977 piece of. Community reinvestment act is still wreaking havoc. This article is brought to you for free and open access by the yale law school faculty scholarship at yale law school legal scholarship repository. The secretary of the treasury, in consultation with the federal banking agencies as defined in section 3z of the federal deposit insurance act 12 u.
Learn vocabulary, terms, and more with flashcards, games, and other study tools. Congress enacted the community reinvestment act cra in 1977 to encourage banks and thrift institutions to serve the convenience and needs of the communities in which they are chartered to do business, including low and moderateincome lmi communities, and to do so in a manner consistent with the safe and sound operation of such institutions. December 23, 20, marks 100 years since passage of the federal reserve act, which created the federal reserve system. Does the community reinvestment act help minorities access traditionally inaccessible neighborhoods. The community reinvestment act of 1977, or cra and the nine significant updates its received from 1989 through 2008 was and has continued to be. Federal housing enterprises financial safety and soundness act. The community reinvestment act and the recent mortgage. Gentrification became lowincome lending laws unintended consequence. Concerns about the availability of credit to lowerincome communities and borrowers and to small businesses and farms are longstanding. Conference report filed in house 09261977 conference report filed in house, h. Community reinvestment act public file tri counties bank. Ever since its enactment in 1977, the community reinvestment act the cra or the act,2 a seemingly modest piece of legislation intended to motivate certain financial institutions to meet community credit needs, has been the focus of intense criticism within the financial community. New community reinvestment act regulation kansas city fed. Community reinvestment act public file updated march 21, 2019.
The act then establishes a regulatory regime for monitoring the level of lending, investments, and. Community reinvestment act of 1977 the perpetual views blog. Community reinvestment act financial definition of. The law was designed to correct the damage of redlining, a nowillegal practice in which the government warned banks away from neighborhoods with high concentrations of immigrants. In 1977, jimmy carter signed the community reinvestment act cra into law. The comptroller also takes this record into account when deciding on certain applications submitted by us. Community reinvestment act intermediate small bank fdic consumer compliance examination manual september 2015 xi3. The community reinvestment act cra of 1977 was enacted to address those concerns. Under the federal community reinvestment act cra, the comptroller of the currency evaluates our record of helping to meet the credit needs of this community consistent with safe and sound operations.
The effects of the community reinvestment act on local. The community reinvestment act cra encourages banks to help meet the credit needs of the communities they are chartered to serve, including the low. Banking regulators became more active in enforcement of cra and. These include meeting the credit needs of low to moderate income neighborhoods, provided that they. Legislative overview the cra statute is recorded in the housing and community development act of 1977 as title viii community reinvestment.
The valuation effects of the 1977 community reinvestment. Choose from 24 different sets of community reinvestment act of 1977 cra flashcards on quizlet. The impact of the community reinvestment act on bank. Federal reserve board community reinvestment act cra. This act actually encouraged the commercial banks and other financial institutions to lend money as loan to the low and middle income group of people. The cra was passed in 1977 amid con cerns about communityoriented lending. Encourages banks to meet the credit needs of the communities theyre licensed to serve. Community reinvestment act cra enacted by congress in 1977, the cra encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations. Proponents of the law believed that finan cial institutions failed to take.
This realization led to the enactment of cra in 1977. The chicago fed opened the following year, in november. Historical perspectives on the community reinvestment act of 1977. Federal reserve board the community reinvestment act. Community reinvestment act induced banks to take bad risks. Some banks might free ride on the efforts of others and cherrypick. The community reinvestment act, which prods banks to make loans in lowincome communities, encouraged banks to make riskier loans, concludes a recent study from the national bureau of economic research. President jimmy carter signed the community reinvestment act on. The community reinvestment act cra, enacted in 1977 to. Community reinvestment act public file the community reinvestment act overview under the federal community reinvestment act cra, the federal deposit insurance corporation fdic evaluates tri counties banks record of helping to meet the credit needs of the communities we serve consistent with safe and sound banking practices. Community reinvestment act public file oregon coast bank.
Pdf does the community reinvestment act help minorities. Law passed by congress in 1977 requiring banks and other depository financial institutions to help meet credit needs of the community in which the bank or financial institution is chartered and operating in. Get the key facts on innovative products and services, investment vehicles, and government programs and initiatives related to community development and consumer banking. The community reinvestment act cra is a federal law enacted in 1977 to encourage depository institutions to meet the credit needs of low and moderateincome neighborhoods. The community reinvestment act of 1977 succeeded in. Passed by congress in 1977, the community reinvestment act cra states that regulated financial institutions have continuing and affirmative obligations to help meet the credit needs of the local communities in which they are chartered.
Given those benefits, the community reinvestment act cra was enacted by the congress in 1977 to encourage federally insured banking institutions to help meet the credit needs of the communities they serve, especially in lowerincome neighborhoods. Historical perspectives on the community reinvestment act. Congressional findings and statement of purpose a the congress finds that 1 regulated financial institutions are required by law to demonstrate that their deposit facilities. Federal deposit insurance corporation overview purpose of the community reinvestment act cra different cra evaluation types how to comply with cra practical ideas to consider. Enacted in 1977, the cra affirmed the obligation of federally insured depository institutions to help meet the credit needs of communities in which they are chartered, consistent with safe and sound operations. The effectiveness of the community reinvestment act congressional research service 1 cra background and objectives congress passed the community reinvestment act of 1977 cra. Learn community reinvestment act of 1977 cra with free interactive flashcards. Congress passed the community reinvestment act federal banking regulatory agencies issued regulation bb to implement law.
R43661 the effectiveness of the community reinvestment act addeddate 20151112 04. An amendment to the community reinvestment act in 1990 requires that each banks cra rating be made public. No community reinvestment act related written comments have been received. Community reinvestment enhancement act of 1994 1994. This paper seeks to address questions about the effects of the community reinvestment act on local communities. The community reinvestment act is a united states federal law designed to encourage. The community reinvestment act cra, enacted by congress in 1977 12 u. Housing and community development act of 1977 and community reinvestment act of 1977, also known as community reinvestment act of 1977housing and community development act of 1977an act to amend certain federal laws pertaining to community development, housing, and related programspublic law 95128, 95th congress, h. The community reinvestment act of 1977 sought to address discrimination in loans made to. Congressional findings and statement of purpose a the congress finds that 1 regulated financial institutions are. R43661 the effectiveness of the community reinvestment act. The community reinvestment act cra, enacted in 1977, requires the federal reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low and moderateincome lmi neighborhoods.
The community reinvestment act, or cra, was signed into law by president jimmy carter in 1977 with the goal of forcing banks to provide credit to businesses and homeowners with poor credit. The community reinvestment act of 1977 succeeded in stopping the discrimination in the case credit practices that were prevelant among the people of the low income groups. Redefining the community introduction in the near future, developing technologies will revolutionize currency and the way in which we use financial institutions imagine, for example, using a personal computer pc at home instead of an. Community development amends the housing and community development act for 1974 to include the alleviation of physical and economic distress through private investment and community revitalization among the objectives of such act. Some banks might free ride on the efforts of others and cherry pick. Home mortgage disclosure act hmda passed by congress tracked lending in all communities. To amend the community reinvestment act of 1977 to enhance the flow of investment capital for low and moderateincome housing in low and moderateincome neighborhoods. Download pdf download community affairs fact sheet. Housing and community development act of 1977title viii.
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