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Assessing the CRA's Necessity and Efficiency*

Robert B. Avery, Raphael W. Bostic, Glenn B. Canner
This paper seeks to address questions about both the need for the Community Reinvestment Act (CRA) and its efficiency. Using data from a recent survey of the performance and profitability of CRA-related lending activities, three main conclusions emerge. First, there is evidence that a majority of surveyed institutions engaged in some lending activities that they would not have in the absence of the CRA. Second, regarding the question of the CRA’s need and efficiency, the results are mixed. we find mixed results. The vast majority of institutions responding to the CRA reported that they were able to do so profitably, while a significant minority of institutions incurred losses conducting some of their marginal CRA-related lending activities. Considered together, these results support the view that the CRA has helped to increase credit flows, although not without some cost. Finally, quantitative evidence suggests that marginal CRArelated lending activity tended to be small, measured either by lending volumes and impact on profitability.