Howard Husock, vice-president of the
market-oriented conservative
Manhattan Institute and author of a book on American housing policy, writes that once in effect, the new rules substantially increased the number and aggregate amount of loans to low- and moderate-income borrowers for home loans. The
Senate Banking Committee estimated that as of 2000, as a result of CRA, such groups had received $9.5 billion in services and salaries. As of that time such groups also had received tens of billions of dollars in multi-year commitments from banks to loan to local communities, including the ACORN housing advocacy organization $760 million; Boston-based Neighborhood Assistance Corporation of America $3 billion; a New Jersey Citizen Action-led coalition $13 billion; the Massachusetts Affordable Housing Alliance $220 million.
[11]
According to a
United States Department of the Treasury study of lending trends in 305 U.S. cities between 1993 and 1998, 467 billion dollars in mortgage credit flowed from CRA-covered lenders to CRA-eligible borrowers. The number of CRA mortgage loans increased by 39 percent. Other loans increased by only 17 percent.
[12] [edit] Congressional Changes 1999
In 1999 the Congress enacted and President Clinton signed into law the
Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act," which repealed the part of the
Glass-Steagall Act prohibiting a bank from offering a full range of
investment,
commercial banking, and
insurance services. The bill was killed in 1998 because
Senator Phil Gramm wanted the bill to expand the number of banks which no longer would be covered by the CRA. He also demanded full disclosure of any financial deals which community groups had with banks, accusing such groups of "extortion." In 1999 Senators
Christopher Dodd and
Charles E. Schumer broke another deadlock by forcing a compromise between Gramm and the Clinton administration which wanted to prevent banks from expanding into insurance or securities unless they were compliant with the CRA. In the final compromise, the CRA would cover bank expansions into new lines of business, community groups would have to disclose certain kinds of financial deals with banks, and smaller banks would be reviewed less frequently for CRA compliance.
[13][14][15] On signing the Gramm-Leach-Bliley Act, President Clinton said that it, "establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act".
[16] [edit] GW Bush Administration Changes 2005
In 2002 there was an inter-agency review of the effectiveness of the 1995 regulatory changes to the Community Reinvestment Act and new proposals were considered.
[3] In early 2005, the Office of Thrift Supervision (OTS) implemented new rules that – according to Congressional
Democrats – substantially weakened the CRA.
[17] This culminated when the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System, and the Office of the Controller of the Currency put a new set of regulations into effect in September 2005.
[18] In April 2005, a contingent of Democratic
Congressmen issued a letter protesting these changes, as they undercut the ability of the CRA to "meet the needs of low and moderate-income persons and communities".
[17]
The regulations included less restrictive new definitions of "small" and "intermediate small" banks.
[2] "Intermediate small banks" were defined as banks with assets of less than $1 billion, which allows these banks to opt for examination as either a small bank or a large bank.
[18] Currently banks with assets greater than $1.061 billion have their CRA performance evaluated according to lending, investment and service tests. The agencies use the Consumer Price Index to adjust the asset size thresholds for small and large institutions annually.
[3]