Federal Deposit Insurance Corp. data shows that over the last decade most banks have complied with the controversial Community Reinvestment Act with no corresponding rise in bank failures.
The debate over the 1977 law that forbids discriminatory lending practices by commercial banks received attention during the presidential campaign last year as Republicans blamed it for the credit crisis. Although the election is over, the debate has continued amongst financial and economics bloggers -- most notably Clusterstock's John Carney.
For what its worth, the FDIC every month reviews a selection of member banks to see how they are complying with the law and gives them a grade. July's crop mostly received satisfactory ratings -- only four weren't in compliance with one of them receiving the lowest rating of significantly not in compliance.
Additionally, the FDIC offers a search tool that provides data on compliance dating back to 1990. Interestingly, a quick search discovers most banks seem to have little difficulty complying with the law. In fact, last year only 22 banks failed to comply with the law, which seems to be the case for much of the last decade. Additionally, there is a clear improvement in CRA compliance during the Clinton years as the number of scofflaw banks dropped from about 100 a year to the current levels.
If CRA really was a factor in the credit crisis, shouldn't bank failures have increased with CRA compliance? Why would it take over a decade of improved CRA compliance before the recent rash of bank failures? - Matthew Wurtzel
See the FDIC's CRA compliance database
Continue reading below
