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The Thrift Industry and the Community Reinvestment Act: Assessing the Cost of Social Responsibility

Donald Vitaliano () and Gregory Stella ()
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Gregory Stella: Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA

Rensselaer Working Papers in Economics from Rensselaer Polytechnic Institute, Department of Economics

Abstract: A stochastic frontier cost function indicates that the annual cost of complying with the anti-redlining Community Reinvestment Act (CRA) is $171,000 per thrift institution, roughly 2.3 percent of variable costs. But compliance cost is significantly less than the estimated 21 percent cost inefficiency. Based on published estimates of the incremental number of mortgage loans induced by CRA, the marginal cost is $38,000 per loan. The regulations whose compliance cost is estimated apply to about 80 percent of all U.S. banks.

JEL-codes: M14 G28 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2003-11
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