"Community Reinvestment Act" - Ensuring Credit Adequacy or Enforcing Credit Allocation?
Vern McKinley
Vern McKinley
[Vern McKinley has worked at the Federal Deposit Insurance Corporation, the Federal Reserve Board, and is currently employed at the Resolution Trust Corporation. The opinions expressed in this paper are solely attributable to the author. This article was adapted from a more extensive paper available from the author at 1730 N. Lynn St., Suite A-67, Arlington, VA 22209]
[1]"In a July 15, 1993 speech on the South Lawn of the White House, President Clinton discussed the availability of credit to low and middle-income areas, and mentioned what has been a relatively obscure statute for most of its seventeen-year existence—the Community Reinvestment Act (CRA). This statute requires financial institutions to reinvest deposit funds back into the communities in which they are located."
[2]"This statute requires financial institutions to reinvest deposit funds back into the communities in which they are located. Clinton claimed that the CRA has not lived up to its potential. In line with this concern, the bank and thrift regulatory agencies, primarily under the leadership of Clinton-appointee Eugene Ludwig of the Office of the Comptroller of the Currency (OCC), have spent most of the past year and a half revising their regulations interpreting this statute. Even Alan Greenspan, the Reagan-appointed Chairman of the Federal Reserve Board (Fed), has recently taken a more active role regarding CRA issues. He recently gave his first speech on the subject after seven years as Chairman, and cast an instrumental vote against an application for a proposed acquisition by Shawmut National Corporation of Massachusetts. The denial was based upon the powers granted to the Fed by
the CRA.
Rather than being a positive trend, these recent actions allow government and special interest groups to influence and even dictate lending decisions. Instead of being expanded, the CRA should be repealed."
[1]"In a July 15, 1993 speech on the South Lawn of the White House, President Clinton discussed the availability of credit to low and middle-income areas, and mentioned what has been a relatively obscure statute for most of its seventeen-year existence—the Community Reinvestment Act (CRA). This statute requires financial institutions to reinvest deposit funds back into the communities in which they are located."
[2]"This statute requires financial institutions to reinvest deposit funds back into the communities in which they are located. Clinton claimed that the CRA has not lived up to its potential. In line with this concern, the bank and thrift regulatory agencies, primarily under the leadership of Clinton-appointee Eugene Ludwig of the Office of the Comptroller of the Currency (OCC), have spent most of the past year and a half revising their regulations interpreting this statute. Even Alan Greenspan, the Reagan-appointed Chairman of the Federal Reserve Board (Fed), has recently taken a more active role regarding CRA issues. He recently gave his first speech on the subject after seven years as Chairman, and cast an instrumental vote against an application for a proposed acquisition by Shawmut National Corporation of Massachusetts. The denial was based upon the powers granted to the Fed by
the CRA.
Rather than being a positive trend, these recent actions allow government and special interest groups to influence and even dictate lending decisions. Instead of being expanded, the CRA should be repealed."
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