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Assessing the CRA's Necessity and Efficiency

Author

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  • Robert B. Avery
  • Raphael W. Bostic
  • Glenn B. Canner

Abstract

This paper seeks to address questions about both the need for the CommunityReinvestment Act (CRA) and its efficiency. Using data from a recent survey of theperformance and profitability of CRA-related lending activities, three main conclusionsemerge. First, there is evidence that a majority of surveyed institutions engaged in somelending activities that they would not have in the absence of the CRA. Second, regardingthe question of the CRA’s need and efficiency, the results are mixed. we find mixedresults. The vast majority of institutions responding to the CRA reported that they wereable to do so profitably, while a significant minority of institutions incurred lossesconducting some of their marginal CRA-related lending activities. Considered together,these results support the view that the CRA has helped to increase credit flows, althoughnot without some cost. Finally, quantitative evidence suggests that marginal CRArelated lending activity tended to be small, measured either by lending volumes andimpact on profitability.

Suggested Citation

  • Robert B. Avery & Raphael W. Bostic & Glenn B. Canner, 2003. "Assessing the CRA's Necessity and Efficiency," Working Paper 8606, USC Lusk Center for Real Estate.
    • Handle: RePEc:luk:wpaper:8606
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    File URL: http://lusk.usc.edu/sites/default/files/working_papers/wp_2003_1016.pdf
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    References listed on IDEAS

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