Abstract

http://ssrn.com/abstract=1407290
 
 

Footnotes (21)



 


 



A Tradable Obligation Approach to the Community Reinvestment Act


Michael Klausner


Stanford Law School

May 19, 2009

Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act, Federal Reserve Banks of Boston and San Francisco, February 2009
Stanford Law and Economics Olin Working Paper No. 375

Abstract:     
This chapter revisits a proposal I made fifteen years ago to redesign CRA in a way that harnesses market forces. Specifically, I proposed that banks be permitted to trade their CRA obligations with one another in a manner analogous to 'cap and trade' regimes used to address environmental pollution. A tradable obligation approach to CRA has the potential to enhance the provision of financial services to low- and moderate-income communities. The potential advantages stem from three sources: The allocation of CRA obligations to banks best able to fulfill them; the promotion of specialization in serving CRA-qualified communities; and increased concentration of lenders in CRA-qualified communities. Specialization and concentration could promote cost efficiencies, the amelioration of information-based market imperfections, and the internalization of externalities associated with CRA-qualified services.

Changes in the financial services sector and in community development institutions make this approach potentially more attractive today than it was when I first proposed it. Banks’ lending outside the areas in which they are physically located has expanded substantially; other types of financial institutions not currently subject to CRA now make a high volume of home mortgage loans; and community development financial institutions have developed that could facilitate the allocation of services to CRA-qualified communities.

Number of Pages in PDF File: 25

Keywords: CRA, Community Reinvestment Act, Community Development

JEL Classification: G21

Accepted Paper Series


Download This Paper

Date posted: May 23, 2009 ; Last revised: November 16, 2009

Suggested Citation

Klausner, Michael, A Tradable Obligation Approach to the Community Reinvestment Act (May 19, 2009). Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act, Federal Reserve Banks of Boston and San Francisco, February 2009; Stanford Law and Economics Olin Working Paper No. 375. Available at SSRN: http://ssrn.com/abstract=1407290

Contact Information

Michael D. Klausner (Contact Author)
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-6433 (Phone)
650-725-0253 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 413
Downloads: 43
Footnotes:  21

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.282 seconds