Teaching Case - The Community Reinvestment Act

The Community Reinvestment Act


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  • Product Description

    In 1977, Congress passed the Community Reinvestment Act requiring financial institutions to meet the credit needs of the communities in which they were located, including those low-income communities to which loans had been consistently denied. This case recounts the efforts of the regional director of the Federal Deposit Insurance Corporation, one of the five federal agencies regulating the financial institutions, to interpret the CRA and to apply its regulations in a heated dispute between a state-chartered mutual savings bank and the residents of one segment of his region. The sequel traces events leading up to the FDIC's rejection of the savings bank's application to build a new branch office, based on the bank's inadequate performance under the Community Reinvestment Act. The case provides a nice problem in political management--that of a field manager who has to interpret and enforce a new statute that is vaguely-worded and possibly unworkable.

    Learning Objective:
    The case can be used to stimulate discussion of a basic problem in public policy, as dramatized by the CRA: Can you use the regulatory mechanism to promote a purpose which the public sees as desirable, or is regulation effective only when the object is to prohibit someone from doing something? And if regulation is not the best vehicle for accomplishing a social purpose, how might one go about using government to supplement a market mechanism to accomplish that end?

  • Other Details

    Publication Date: January 01, 1980
    Teaching Plan: Available with Educator Access
    HKS Case Number: 336.0
    Case Author: David Jernigan
    Faculty Lead: Stephanie Gould
    Pages (incl. exhibits): 10
    Setting: United States
    Language: English
    Funding Source: Office of Personnel Management and the Departments of Commerce, Defense, Health and Human Services, Housing and Urban Development, and Labor through OPM Contract 61-80
    _year: Older than 2000
    _pages: 1-15
    _geography: US & Canada
  • Warranty Information

    /review/336.0.EducatorCopy.pdf, /teachingplan/336_2.pdf