In 1977, Congress passed the Community Reinvestment Act (CRA) to encourage expanded lending and investment in lower income communities. In accordance with the Act, federal bank regulators periodically evaluate banks’ lending performance in such communities, providing both carrot and stick to encourage banks to expand lending there. Our analytical model demonstrates that CRA low-income lending requirements have cost consequences for middle- to high-income lending and that such requirements may have distorted credit allocation. Our model also indicates that there are limits on regulators’ ability to induce further expansion of low-income lending in today’s competitive banking environment.
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Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.
Volume (Year): (2002) Issue (Month): Spr () Pages: 1-27 Download reference. The following formats are available: HTML,
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Joskow, Paul L. & Rose, Nancy L., 1989.
"The effects of economic regulation,"
Handbook of Industrial Organization,
in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 25, pages 1449-1506
Elsevier.
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