Moving Forward: Give Credit Where Credit Is Due: An Approach to Revamping CRA

MF10-9: The Community Reinvestment Act (CRA) is in need of a major overhaul. Much about the financial services industry has changed and much has been learned about the strengths and weaknesses of the Act since it was enacted in 1977 and of the regulations which last underwent a major rewrite more than 15 years ago. Over this time, the share of financial assets held by banks has fallen as banks faced new competition from non-bank institutions, such as money market funds and independent mortgage companies. A few very large banks have emerged with nationwide branch networks, and the number of banks has declined in half to about 8000 nationwide. Newly emerged internet banks have been able to serve national customer bases without opening local branches. The practice of community development has evolved to encompass not just low income housing but also mixed-income housing, jobs, education, health, public safety and more. Further, the shift by bank examiners to more of a focus on production volumes has resulted in unintended consequences that have undermined CRA’s effectiveness...