Date of Award


Document Type

Campus Access Dissertation

Degree Name

Doctor of Philosophy (PhD)


Public Policy

First Advisor

Thomas Ferguson

Second Advisor

Alan Clayton-Matthews

Third Advisor

Glenn Canner


In 1977, Congress passed the Community Reinvestment Act (CRA) addressing discrimination in the form of the widespread practice of "redlining" on the part of many financial institutions. Prior to the passage of the CRA, bankers often classified neighborhoods based on certain socio-economic criteria and refused to approve loans in those neighborhoods to any applicant who met those criteria--usually low-income or minority residents--regardless of the applicant's demonstrable creditworthiness. The term "redlining" was coined to reflect the most blatant cases of such discrimination, in which these communities or neighborhoods were actually outlined in red on a map.

When the CRA was passed, it required all commercial banks and savings associations to extend credit in all the communities in which they operated, provided that such loan activity would not undermine the fiscal health or sound operation of any such financial institution. Furthermore, the law required federal supervisory agencies to assess how well banks were meeting that obligation and make public a record of their CRA performance.

To date, most of the research in the area has focused on disparities in residential mortgage lending, and to a lesser degree in small business lending, between whites and nonwhites and between low-income and upper-income neighborhoods (Immergluck, 1999a). Scarce attention has been given to the role that supervisory agencies play in assigning CRA evaluation grades, particularly given the large percentage of banks that receive passing grades.

The purpose of this research was to assess the efficacy of the CRA as public policy that discourages disparity in lending in low- and moderate-income (LMI) communities. Logistic regression analysis was used to analyze the factors--such as bank characteristics, community reinvestment activities and community characteristics--that most strongly influenced regulators' decisions in determining a bank's CRA rating.

Interestingly enough, the regression model that best described the relationship between the CRA grade and the predictor variables suggests that regulators respond to absolute size. Additionally, bank's lending to LMI borrowers compared to peers is a predictor of passing CRA rating. This research provides evidence that supports the argument that the CRA continues to have challenges that impact the policy's intent.


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