The Community Reinvestment Act: Early Experience and Problems

The Community Reinvestment Act of 1977 (CRA), effective November 6, 1978, requires financial institutions to “ … demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business.” The CRA directs four regulatory agencies- the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Home Loan Bank Board (FHLBB), and the Federal Deposit Insurance Corporation (FDIC)-to encourage each institution under their jurisdiction to help meet the credit needs of the local community. The four regulatory agencies also are required to assessan institution’s record of meeting the credit needs of its community, including low-to-moderate income neighborhoods, consistent with the safe and sound operation of the institution. These assessments are to be taken into account when the regulatory agencies evaluate various applications by institutions.