WASHINGTON -- The Shadow Financial Regulatory Committee called on Congress Monday to repeal the Community Reinvestment Act.
Although the group's position is not new, its view on CRA is likely to fall on more receptive ears with Republicans ready to take control of Congress for the first time in 40 years.
Republicans are unlikely to repeal the law. But they are expected to take a critical look at it, and views of groups like the shadow committee -- which comprises 12 academics, lawyers, and bankers -- could play a prominent role in the debate.
"We reiterated a position that we came out with two meetings ago: that CRA is inefficient, does not achieve its objective, and should be repealed," shadow committee co-chairman George G. Kaufman said.
The group, which periodically reviews bank regulations, announced in a policy statement that changes in financial markets during the past 20 years should force lawmakers to reexamine the issue.
"We believe this reassessment will lead Congress to conclude...that the Community Reinvestment Act should be repealed," the shadow committee said.
The group also criticized banking and thrift executives who have called on legislators to extend the CRA's coverage to mutual funds and credit unions, calling it "a strategy intended only to bring in more opposition to CRA itself."
The law, including its proposed reforms, burdens banks with unnecessary compliance costs, the group said, adding: "Like Truth-in-Lending, CRA has taken on a life of its own, resulting in ever-increasing costs and regulatory management."
CRA advocate Kenneth Thomas said the shadow committee wants to repeal the law because it refuses to believe that redlining and loan discrimination are problems.
"Many of those economists are ivory tower academics who have not been in the real world and seen discrimination," Mr. Thomas said.
If these economists had seen the problem, they would know that CRA allows capitalism to work, National Community Reinvestment Coalition president John Taylor added.
"It puts money in the hands of creditworthy borrowers who otherwise would be overlooked by lending institutions," Mr. Taylor said, "and it creates more taxpayers and a healthier economy, especially in areas where we want to see economic growth."