A Tradable Obligation Approach to the Community Reinvestment Act

Authors

Michael Klausner, Stanford Law School

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Volume 4, Issue 1 | February 1, 2009

In articles published in 1994 and 1995, I proposed that the Community Reinvestment Act (CRA) be modified to allow banks to trade their CRA obligations with one another in a manner analogous to cap-and-trade regimes used to address environmental pollution. As in the environmental protection context, a tradable obligation approach to the CRA has the potential to enhance the provision of financial services to low and moderate-income communities at lower cost than does the current command-and-control approach.