Date Added: Apr 2011
The role of the Community Reinvestment Act (CRA) as a causal factor in the financial crisis remains unresolved. This research attempts to empirically determine whether the CRA played a role in the crisis by unintentionally encouraging large commercial banks to close branches and avoid CRA requirements. The results indicate that following the 1995 revision to the CRA, large commercial banks increasingly closed branches in low-income neighborhoods. This may have made banks' performance stronger and given the false appearance that CRA institutions were not a significant factor in the 2007-2008 financial crisis.