Research Paper

Who Lends Beyond the Red Line? The Community Reinvestment Act and the Legacy of Redlining

September 27, 2019

Authors Kevin A. Park Roberto G. Quercia

Current Themes

Who Lends Beyond the Red Line? The Community Reinvestment Act and the Legacy of Redlining -- title page

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Overview

“Redlining” is when financial institutions refuse to serve to particular neighborhoods, often based on their racial and ethnic composition. Maps like those infamously created by the New Deal’s Home Owners’ Loan Corporation in the Great Depression rated and color-coded neighborhoods, assigning red to those considered the greatest credit risk. This report looks at the current socioeconomic conditions of formerly redlined neighborhoods.

Key Message

Park and Quercia provide empirical evidence that neighborhood risk ratings in the past are associated with differences in socioeconomic conditions in the present. The research on the impacts of the CRA on lending indicates that CRA-regulated institutions are more active lower income communities than they would have otherwise been. CRA modernization efforts need to build upon this success.