TY  - JOUR
AU  - Agarwal,Sumit
AU  - Benmelech,Efraim
AU  - Bergman,Nittai
AU  - Seru,Amit
TI  - Did the Community Reinvestment Act (CRA) Lead to Risky Lending?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18609
PY  - 2012
Y2  - December 2012
UR  - http://www.nber.org/papers/w18609
L1  - http://www.nber.org/papers/w18609.pdf
N1  - Author contact info:
Sumit Agarwal
Associate Professor of Finance and Real Estate
NUS Business School
Mochtar Raidy Building, BIZ1
15 Kent Ridge Road
Singapore, 119245
Tel: +65 8118 9025
E-Mail: ushakri@yahoo.com

Efraim Benmelech
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-4462
Fax: 847/491-5719
E-Mail: e-benmelech@kellogg.northwestern.edu

Nittai Bergman
MIT Sloan School of Management
100 Main Street, E62-632
Cambridge, MA 02142
Tel: 617/253-2933
Fax: 617/258-6855
E-Mail: nbergman@mit.edu

Amit Seru
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/834-2767
E-Mail: amit.seru@chicagobooth.edu
M2  - featured in NBER digest on 2013-05-01
AB  - Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.
ER  -