These protections are not included in the proposed new regulations. Banks should not be required to collect data on the race and gender of the owners of small firms that make loan applications. The CRA does not provide authority for any regulatory decisions based on such data, and the potential use of these data is not defined in the proposed regulations. The potential for abuse in the use of these data is also substantial. The above comparisons should be sufficient to illustrate why the Community Reinvestment Act should be repealed.
Current regulations are only moderately costly but are otherwise innocuous.
The proposed new regulations would be very costly to the economy, to the banking system, and to the communities they serve. Congress should be most critical of proposals to use regulatory powers to reallocate credit, either across neighborhoods or among groups. The primary long term effect of such measures would be to further contract the banking system, increasing the number of neighborhoods dependent on check cashing outlets and pawnshops. The Community Reinvestment Act was the wrong solution to a genuine problem, for the most part created by other government regulations. Until recently, federal restrictions on interstate banking and state restrictions on intrastate branching severely restricted bank competition in local markets and the potential for geographic diversity of loan portfolios.