Democratizing Capital: The History, Law, and Reform of the Community Reinvestment Act

The Community Reinvestment Act of 1977 (CRA) has made great progress in achieving its dual purposes: eliminating bank redlining and promoting reinvestment in previously redlined neighborhoods. In doing so, the CRA has helped to democratize capital by giving more people a voice in bank lending decisions and including more people in the economic mainstream by influencing banks to make loans to them to buy homes or open small businesses. Despite the CRA\u27s success, the CRA has not reached its full potential. One of the main reasons for this is that the federal agencies that enforce the CRA are so fearful of allocating credit that they use vague and subjective criteria for evaluating bank lending, making it difficult to hold a bank accountable for a poor lending record or even to know what constitutes a poor lending record. In order for the CRA to reach its full potential, objective and quantitative criteria for evaluating a bank\u27s CRA performance must be implemented. Such criteria will maximize both the public\u27s voice in decisions about bank lending and the number of people who receive loans. This article proposes such criteria