The Thrift Industry and the Community Reinvestment Act: Assessing the Cost of Social Responsibility
AbstractA stochastic frontier cost function indicates that the annual cost of complying with the anti-redlining Community Reinvestment Act (CRA) is $171,000 per thrift institution, roughly 2.3 percent of variable costs. But compliance cost is significantly less than the estimated 21 percent cost inefficiency. Based on published estimates of the incremental number of mortgage loans induced by CRA, the marginal cost is $38,000 per loan. The regulations whose compliance cost is estimated apply to about 80 percent of all U.S. banks.
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Bibliographic InfoPaper provided by Rensselaer Polytechnic Institute, Department of Economics in its series Rensselaer Working Papers in Economics with number 0312.
Date of creation: Nov 2003
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Find related papers by JEL classification:
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Social Responsibility
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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