Community Reinvestment Act lending: Is it profitable?

In 1977, Congress passed the Community Reinvestment Act (CRA) to encourage federally insured depository institutions to lend in lowto moderate-income neighborhoods and to lowto moderate-income people. Since then, the profitability of the many special lending programs designed to achieve these goals has been questioned on both theoretical and practical grounds. Arguments range from “if the business was profitable you wouldn’t have to pressure institutions to do it" to “we found new markets and new profits through CRA lending.” While CRA requires banks and thrifts to “help meet the credit needs of communities in which they are chartered,” it further cautions that these efforts should be “consistent with safe and sound operations of such institutions.”