This is the Cato Daily Podcast for Wednesday, July 10th, 2019.

I'm Caleb Brown.

The Community Reinvestment Act was supposed to help lower income borrowers get access to mortgage

financing. The law's goals are not well defined and it's not clear that there's a

specific need the law is effectively meeting today. Diego Ziluaga is author of a new Cato paper on the Community Reinvestment

Act. We spoke last week.

So the Community Reinvestment Act was a piece of legislation passed in 1977 and it aimed to end the practice of quote-unquote

redlining which had been prevalent since the 1930s at least and was basically

lending discrimination aimed at minority and low-income communities.

From the time of the New Deal, the Home Loan Banks and the Federal Housing Agency instructed institutions to lend in certain areas, but also discourage them from lending in what were considered high-risk areas.

And high-risk was often a euphemism for a high density of minority populations and immigrant

populations and low-income people.

And as a result of that discouragement, credit didn't flow as freely and as easily into

those communities as to others. There's a tremendous legacy of of wealth

inequality and inequality of, you know, social services and, you know, community services as a result.

And the CRA went past in 1977, intended to redress some of that and it's considered part of

the anti-discrimination legislation of that period with other measures being

the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, all of which were aimed

at making sure that credit went to the more credit worthy rather than to specific demographics.

Since the law was passed, what have been the measurable effects of it on borrowing and lending and home ownership for lower income people? and and people who were looking at the legislation were skeptical that it could work very effectively.

The CRA says that banks should lend in the communities where they conduct business.

The way regulators have since the 1970s interpreted that

...