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Old 11-02-1998, 10:44 AM
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Default Economic or cost-benefit analysis of CRA

Much of the CRA discussion on this list has focused on "CRA as a tax." CRA
is viewed as part of the tax price for depository insurance. Thus, the
impact analysis focuses on the total lending dollars leveraged by CRA, now
up to $920 billion dollars in CRA agreements.

A second type of view sees "CRA as a market correction." CRA draws banks
attention to profitable lending that they wouldn't otherwise notice, sort
of affirmative action for bankers. The impact in this case would focus on
loan loss rates for loans leveraged by CRA. Woodstock Institute did a
limited study of loan loss rates for affordable mortage lending and found
these CRA loans to be on a par with conventional homeowner loans, and
substanitally less risky than loans to multi-family properties. Self Help
is building the mother of all databses in this area with its billion dollar
inititiative to purchase (and monitor) the CRA home loans from several
major banks.

Bill Myers

At 12:23 PM 10/26/1998 , wrote:
>While I am on-line, I'd like to know if anyone could lead me to a rigorous
>economic or cost-benefit analysis of CRA. I have been looking for
>something non-polemical for some time and can't seem to find anything that
>puts the politics aside and takes an objective look at the net impact of
>CRA on the country as a whole. It is hard to be an advocate for these
>kinds of programs internationally without a clear economic argument to
>stand on. I'd appreciate it if someone could help me out!
>Wendy Jagerson Teleki
>Small Enterprise Unit
>Private Sector Development Department
>World Bank

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