The Community Reinvestment Act, and the effect the requirements have on the lending institutions in Nebraska

The purpose of this empirical study was to determine the effect the requirements of the Community Reinvestment Act, CRA, has on the lending institutions in Nebraska.;Each participant was sent a three page questionnaire which first categorized the institutions by bank type, size, and rating. The lending institutions were further analyzed by loan-to-deposit ratios, number of programs and new products, hours spent on the CRA, and an overview of loans by type and percentage in each lending institution. The lending institutions were asked to complete a self-rating, Likert instrument, based on their bank performance. Open-end questions allowed the lending institutions to expand and explain their responses.;Characteristics of the sample were the following: The respondents were classed by size, and by rating of federal agencies with 70.5 percent reporting satisfactory while 29.5 reported outstanding. No respondents reported a rating less than Satisfactory.;There were no statistical data to support the claim that the CRA was of benefit to the customers in the areas served by the respondents. There was an increase of.25+ percent in overall lending rates as a result of the CRA. A minimal increase in loan-to-deposit ratios was reported but not as a result of the CRA.;One hundred seventeen Nebraska lending institutions participated in the study. This represented a random sample of the lending institutions in Nebraska.;The following recommendations were made: (a) Additional quantitative research needs to be conducted to determine that the sample represents the total population. (b) Additional education in banking and finance should be incorporated in our public schools as well as the community college and post secondary schools. (c) The Federal Government should consider revamping the CRA for lending institution in states such as Nebraska. (d) The CRA regulations increase the rates charged by lending institutions; if eliminated, the rates should lower and the economy should be stimulated by providing funds to all borrowers.