Despite new evidence the Community Reinvestment Act led to riskier lending and played a key role in the subprime mortgage crisis, the Obama administration is broadening the anti-redlining regulation's authority and scope, spooking bankers.
A recent study by the National Bureau of Economic Research, the nation's pre-eminent economic research group, states that the CRA "clearly" had a major impact on the flood of subprime loans made in the late 1990s and 2000s, which directly led to the housing crisis.
By quietly expanding the regulation, analysts say President Obama is picking up where President Clinton left off in April 1995, when he rewrote rules for what had been a largely toothless law as first drafted in 1977.
Through executive orders, Clinton set strict numerical lending targets for banks in "underserved" neighborhoods, while ordering regulators to crack down on alleged bank redlining.
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