Since its passage in 1977, the community reinvestment act. 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. Understanding the basics of cra federal reserve bank of. Historical perspectives on the community reinvestment act of 1977 by michael v. An introduction to the community reinvestment act john meeks atlanta region fdic community affairs. Berry december 23, 20, marks 100 years since passage of the federal reserve act, which created the federal reserve system.
All handout files must be read with adobe acrobat reader. It induces depository institutions to help meet the credit needs of the local communities in which they are char. Dec 31, 2019 the community reinvestment act cra, enacted by congress in 1977 12 u. An amendment to the community reinvestment act in 1990 requires that each banks cra rating be made public. Federal reserve board the community reinvestment act.
The community reinvestment act was introduced in 1977 and. Community reinvestment act of 1977 federal reserve history. 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. 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 community reinvestment act and the economics of lending. Jan 26, 2009 the community reinvestment act of 1977. The cra obliged financial institutions to meet the credit needs of lowerincome communities in which they collect deposits. The federal reserves central missions of maintaining price stability a. Community reinvestment act public file updated march 21, 2019.
Aug 21, 2015 the community reinvestment act cra encourages banks to help meet the credit needs of the communities they are chartered to serve, including the low and moderateincome neighborhoods in those areas. Community reinvestment act united states 1977 britannica. 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. 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. Congress enacted the community reinvestment act cra in 1977. In defense of the community reinvestment act scholarworks.
The community reinvestment act of 1977 directed federal regulatory agencies to encourage banks and other lending institutions to help meet the credit needs of the local communities in which. Encourages banks to meet the credit needs of the communities theyre licensed to serve. Treasury department issues recommendations on reforming the community reinvestment act april 4, 2018 on april 3, 2018, the u. This year marks the thirtieth anniversary of the community reinvestment act cra. Historical perspectives on the community reinvestment act of. Community reinvestment act cra an act passed by congress in 1977 to encourage financial institutions to meet the credit needs of the communities in which they operate, including low and moderateincome neighborhoods. 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. The community reinvestment acts harmful legacy competitive. Pdf the community reinvestment act after thirty years. The stated intentions of green dot bank to meet its obligations under the community reinvestment act demonstrate the inability of the 1977 law to adapt to changes in todays banking system.
Federal deposit insurance corporation background cra enacted in 1977 to. The community reinvestment act an overview by stuart c. Pdf the community reinvestment act of 1977 cra is the most important federal. Treasury department issued a report detailing a number of recommendations for reforming and modernizing the community reinvestment act of 1977 cra framework. Congress passed the community reinvestment act federal banking regulatory agencies issued regulation bb to implement law. When the community reinvestment act or cra was passed in 1977, banks were riding high, experiencing steady recovery since the low point of the recession in 1975. December 23, 20, marks 100 years since passage of the federal reserve act, which created the federal reserve system. Community reinvestment improvement act of 1994 1994. 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. Treasury department issues recommendations on reforming.
Housing and community development act of 1977title viii. Conference report filed in house 0926 1977 conference report filed in house, h. Perspectives on the future of the community reinvestment act 47 t he community reinvestment act cra of 1977 responded to charges of redlining and discrimination by financial institutions. Handout archive community reinvestment act cra bankers. Community reinvestment act public file tri counties bank. 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. Congress took its most decisive step to end redlining with the community reinvestment act of 1977. Community reinvestment enhancement act of 1994 1994. The chicago fed opened the following year, in november. Conference report filed in house 09261977 conference report filed in house, h.
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. The community reinvestment act cra, enacted by congress in 1977 12 u. Jun 25, 2019 the community reinvestment act encourages bank lending to low and moderateincome neighborhoods. Many advocates for the passage of this new law believed that this deterioration was fueled by, among other things, limited credit availability. Learn community reinvestment act of 1977 cra with free interactive flashcards. Cra is implemented by regulations 12 cfr part 25,iv 228,v 345,vi and 563e.
The community reinvestment act cra encourages banks to help meet the credit needs of the communities they are chartered to serve, including the low. Community reinvestment act financial definition of. Banking regulators became more active in enforcement of cra and. Download pdf download community affairs fact sheet. Many bankers object that the statute imposes burdensome requirements and unfairly disadvantages. Community reinvestment act wikipedia, the free encyclopedia. No community reinvestment act related written comments have been received. Community reinvestment act induced banks to take bad risks. The community reinvestment act and the economics of. Apr 21, 2010 the merger or consolidation with, or the acquisition of the assets, or the assumption of the liabilities of a repulated financial institution requiring approval under section 18c of the federal deposit insurance act or under regulations issued under the authority of title iv of the national housing act. Congress passed the community reinvestment act of 1977 cra. The effectiveness of the community reinvestment act. That had contributed to the growth of ghettos in the 1970s.
Community reinvestment act public file oregon coast bank. The community reinvestment act is based on geography, so its perfectly possible to comply with cra and have that pattern, said patricia mccoy, a law professor at boston college who oversaw mortgage policy initiatives for the consumer financial protection bureau. In redlining, neighborhoods were designated as not good for investment. The community reinvestment act encourages bank lending to low and moderateincome neighborhoods. Other articles where community reinvestment act is discussed. Branch locations main office january 2000 hours of operation. Home mortgage disclosure act hmda passed by congress tracked lending in all communities.
Gentrification became lowincome lending laws unintended. The community reinvestment act cra was enacted in 1977 to prevent redlining. The country was excited about the recent release of the innovative apple ii computer with its amazing 4kb of ram and fiveinch floppy disc drive. Concerns about the deteriorating condition of americas cities, particularly lowerincome neighborhoods, led to the enactment of the community reinvestment act in 1977. Community reinvestment act financial definition of community. 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. Community reinvestment act introduction the community reinvestment act cra is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low and moderateincome neighborhoods, consistent with safe and sound banking operations.
Choose from 24 different sets of community reinvestment act of 1977 cra flashcards on quizlet. 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 bank s record of helping to meet the credit needs of the communities we serve consistent with safe and sound banking practices. Regulation bb community reinvestment bankers online. To amend the community reinvestment act of 1977 to enhance the availability of investment capital for low and moderateincome housing in low and moderateincome neighborhoods. The community reinvestment act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low and moderateincome neighborhoods, consistent with safe and sound banking operations. The comptroller also takes this record into account when deciding on certain applications submitted by us.
Historical perspectives on the community reinvestment act. Understanding the basics of cra federal reserve bank of san. Historical perspectives on the community reinvestment act of 1977. 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. The federal community reinvestment act, which was passed in 1977, requires that all fdic insured banks, savings banks and savings and loan associations, whether state or federally chartered, conduct lending activities within their assessment areas. Not guilty mortgage data refute charge that the cra is at the root of the financial crisis january 26, 2009 prepared by.
As a condition for the federal reserve s approval of green dots application to buy bonneville. These archived files are provided at no charge to bcg members. Community reinvestment act of 1977 cra ought to play. Treasury department issues recommendations on reforming the.
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