The Community Reinvestment Act and the Subprime Mortgage Crisis: Is There a Connection? October 23, 2008

Host: Hudson Institute. The Community Reinvestment Act (CRA), enacted by the Congress in 1977, is intended “to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations,” according to the Federal Reserve Board. The CRA rating is one of the criteria for Federal Reserve approval of bank mergers and branches; a higher rating goes to banks that fund inner-city and low-income mortgages and real estate development projects. CRA was substantially strengthened in 1995; since then banks and other depository institutions have expanded their CRA lending.

In the aftermath of the subprime mortgage crisis, questions are being raised about how “safe and sound” were the operations of banks subject to CRA. Critics have charged that banks have been compelled to make risky loans to unprepared borrowers and in neighborhoods with declining property values. Advocates have responded that the coverage of CRA was relaxed for smaller financial institutions in 2002, before the subprime crisis, and that lenders not covered by CRA have been making a disproportionate share of subprime mortgages. Is there a connection between the subprime mortgage crisis and the Community Reinvestment Act?


On Thursday, October 23, two Hudson Institute centers, the Bradley Center for Philanthropy and Civic Renewal and the Center for Housing and Financial Markets, will co-host a panel of experts, including the National Fair Housing Alliance’s DEBORAH GOLDBERG, HOWARD HUSOCK from the Manhattan Institute, RUSSELL ROBERTS of George Mason University, and the Consumer Federation of America’s BARRY ZIGAS, to discuss these and other questions. Hudson Institute’s JOHN WEICHER, director of Hudson’s Center for Housing and Financial Markets, will moderate the discussion. Lunch will be served. Please join us!

Official Website: http://www.hudson.org/index.cfm?fuseaction=hudson_upcoming_events&id=617