Federal banking agencies recently revised the regulation implementing the Community Reinvestment Act, which encourages banks to lend in low- and moderate-income neighborhoods. Since there is little conclusive empirical evidence that banks fail to meet the credit needs of such neighborhoods, however, the CRA regulations should instead be viewed as a tax on banking. Direct public subsidies for community development would be a more efficient means of improving the condition of low-income neighborhoods.
Amanda L. Kramer
To receive a notification by email when Economic Quarterly is posted online or to order single copies of past issues, click on the links below (published online only since 2012).