BankThink The case for market-based CRA reform

The Community Reinvestment Act was enacted in 1977 to hold banks accountable for “meeting the credit needs” of their local communities in a safe and sound manner. Yet if the CRA was not in place today, would stakeholders want to enact it? Many people may be inclined to answer affirmatively simply based on the CRA’s statutory goal. Furthermore, when it became law, many low-income and minority communities found mortgage and small-business lending hard to come by. At the time, the CRA sought to address persistent and institutionalized credit discrimination going back to the 1930s, when the government-sponsored Home Owners’ Loan Corporation discouraged banks from providing credit to “hazardous” areas, colored red on HOLC-issued maps. Such “redlining” prevailed for decades.