The Community Reinvestment Act: Questionable Premises and Perverse Incentives

Annual Review of Banking Law, Vol. 18, 1999

Posted: 16 Apr 1999

See all articles by Keith N. Hylton

Keith N. Hylton

Boston University - School of Law

Vincent D. Rougeau

Notre Dame Law School

Abstract

In this paper we will argue that the CRA as it is currently understood and enforced is no longer an appropriate tool for dealing with discrimination in the lending market and the lack of access to credit in neighborhoods dominated by minorities and people of modest, or minimal means. The statute is based on premises that are questionable in today's lending market, and thus it is not clear that the social benefits provided by the statute are significant. Further, enforcement of the statute generates certain perverse incentives that are costly to society. We emphasize the costly incentive effects in this paper. While the goals of the CRA remain desirable, the current enforcement framework should be reformed.

Note: This is a description of the paper and is not the actual abstract.

JEL Classification: G21, G28

Suggested Citation

Hylton, Keith N. and Rougeau, Vincent DePaul, The Community Reinvestment Act: Questionable Premises and Perverse Incentives. Annual Review of Banking Law, Vol. 18, 1999. Available at SSRN: https://ssrn.com/abstract=154568

Keith N. Hylton (Contact Author)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States
617-353-8959 (Phone)
617-353-3077 (Fax)

Vincent DePaul Rougeau

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States
219-631-8610 (Phone)

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