Which statement best describes the primary objective of the Community Reinvestment Act (CRA)?

• A. To provide federal subsidies to banks
• B. To regulate interest rates
• C. To encourage depository institutions to meet the credit needs of their surrounding communities, including low- and moderate-income neighborhoods
• D. To measure housing discrimination in valuation

Answer: (C)

The Community Reinvestment Act is about making sure banks and other insured depository institutions meet the credit needs of the communities where they operate, including low- and moderate-income neighborhoods. This was adopted to counter redlining and to ensure access to loans and financial services across all parts of a bank’s service area. Regulators evaluate how well a bank fulfills this purpose by looking at lending, investments, and services in the relevant communities, and strong CRA performance can influence regulatory decisions about mergers or expansions. The other statements don’t fit the main goal: it isn’t about providing federal subsidies to banks, regulating interest rates, or measuring housing discrimination in valuation.