Community Reinvestment Act and Local Governance Contexts : Advancing the Future of Community Reinvestment?

One main goal of the Community Reinvestment Act (CRA) of 1977 is to stimulate reinvestment by increasing CRA-regulated lending activity in low-income and minority communities. CRA has been applauded for democratizing credit (Barr, 2005) however, its regulatory shortcomings, namely the need to strengthen and expand federal enforcement, have also been acknowledged (Fishbein, 1992; Immergluck, 2004). The design of CRA actively encourages community-based groups and coalitions to participate in regulation and oversight. In many cities across the country, organized nonprofit networks and community-based groups have played pivotal roles in making the goals of community reinvestment a reality. Community mobilization can be a positive externality, as it allows for the public and the local community to provide input and participate in CRA governance. However, reliance on mobilization at the local level can also produce negative externalities, particularly in places that lack the capacity to mobilize around CRA or as this capacity changes over time.This article suggests that a changed governance context at the local level may be associated with the achievement of community reinvestment goals. We conducted a longitudinal analysis (from 2007 to 2014) of the case of St. Louis, Missouri, a city that experienced a change in community governance around CRA in 2009. Historically, St. Louis could be characterized as a city in which CRA mobilization was lacking; however, in 2009, a reinvestment coalition formed and took actions such as negotiating agreements with lenders, providing public comments to regulators, and building partnerships and relationships with lenders. The results of the analysis suggest that community mobilization around CRA is associated with some positive outcomes — such as increases in the likelihood of loan approvals in the post-CRA governance context and by lenders with CRA agreements. However, we also find that the post-CRA governance context is associated with differential effects in terms of which racial and ethnic groups benefit from the CRA agreements. Community mobilization around CRA appears to be associated with a stimulation of community reinvestment activity and may be a positive part of CRA design; however, alone, it may not be enough to achieve the broader ideals of community reinvestment. We conclude with a discussion of future policy implications