In 1977, concerned about the denial of credit to lower-income communities—both minority and white—Congress enacted the Community Reinvestment Act (CRA). CRA states that “regulated financial institutions have [a] continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.” CRA compliance is overseen by four federal agencies: the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of Currency, and the Office of Thrift Supervision.

The CRA statute requires that federal bank regulators both “assess the institution’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of such an institution” and “take such record into account  in its evaluation of an application for a deposit facility by such institutions.” Institutions are given one of four ratings, ranging from Outstanding to Substantial Noncompliance, and examination reports (Public Evaluations) are made public.
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In the 30 years since its enactment, CRA has generated major changes in the manner in which banks and thrifts view and serve low- and moderate-income communities and consumers. Billions, perhaps trillions, of dollars of credit and investment have come into these communities spurred, incented, or directed by CRA and collateral laws such as the Home Mortgage Disclosure Act (HMDA), various antidiscrimination statutes, and obligations placed on Fannie Mae and Freddie Mac.

This is an excerpt from The NEXT American Opportunity. The full text can be downloaded as an Adobe PDF Document.