Abstract
The Community Reinvestment Act (CRA) is fundamentally a regulatory effort to lean on banks and savings institutions, in vague and subjective ways to make loans and investments that (the CRA's proponents believe) those depository institutions would otherwise not make. It is a continued effort to preserve old structures in the face of a modernizing financial economy. At base, the CRA is an anachronistic and protectionist effort to force artificially a local focus for finance in an increasingly competitive, increasingly electronic, and ever-widening realm of financial services. Further, ironically, the burdens of the CRA may well discourage banks from setting up new locations in low-income neighborhoods and thus providing local residents with better-priced alternatives to high-cost check-cashing and payday lending establishments. There are better ways to achieve the goals of the CRA's advocates, and this paper discusses those superior routes.
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