This is the Cato Daily Podcast for Friday, January 3rd, 2020.

I'm Caleb Brown.

How well does the Community Reinvestment Act work to protect low-income people from

discrimination and housing finance.

Cato's Diego Ziluaga has found that many of the benefits of the Act appear to

flow to gentrifiers, moderate to high-income borrowers, not the Act's intended recipients. We spoke about

some forthcoming changes to the Act last month. The Community and

Reinvestment Act is aimed at getting housing capital to people so that they can own homes, so that they can make the one pretty good decision that most people tend to make in their lives in the United States

But a lot of the rules that govern are within the Community and Reinvestment Act

Haven't been very good and have not targeted properly the things that they were supposed to target. Is that fair? I think that's fair. The CRA was enacted in 1977 to address what was called redlining, this perceived practice

by financial institutions of avoiding certain neighborhoods, particularly minority and low-income ones.

And obviously the late 1970s were also a time of urban flight.

There was a great deal of concern about urban decay.

And the CRA sought to redress that by instructing regulators to evaluate banks about the extent

to which their credit reached low-income communities and all of the communities where they have

offices and branches.

Now the Act has been in place for 42 years.

Some people argue it's been effective at getting lending to the communities that it targets.

Other people argue that it's increased the risk in bank portfolios.

And I myself have found that in the DC area in recent years, a lot of the lending that the

CRA would reward is actually going to gentrifiers to high-income borrowers moving into

low-income areas because those loans still count. So about two-thirds of mortgages that qualify

...