From the Right

Observing my upside down America

The famous meltdown began in what!!? 1977??

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Let the meltdown begin

The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining. The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation. To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions.

Where did this bill get started?

The CRA was passed as a result of national pressure to address the deteriorating conditions of American cities particularly lower-income and minority neighborhoods. Community activists, such as Gale Cincotta of National People’s Action in Chicago, had led the national fight to pass, and later to enforce the Act.

Hmmm… community activist. Rings a faint bell.

And who signed this beautiful piece of legislation into law?

The original Act was passed by the 95th United States Congress and signed into law by President Jimmy Carter in 1977.

A democrat. Who woulda thunk?

…and the effects?

Some economists, politicians and other commentators have charged that the CRA contributed in part to the 2008 financial crisis by encouraging banks to make unsafe loans. Others however, including the economists from the Federal Reserve and the FDIC, dispute this contention. The Federal Reserve and the FDIC holds that empirical research has not validated any relationship between the CRA and the 2008 financial crisis.

You can read the time line of events here.

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Written by Ben

June 27, 2009 at 11:06 am

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