PAST ARTICLES AND EDITORIAL BOARDS TURNING DAVID AND GOLIATH INTO THE ODD COUPLE:
HOW THE NEW COMMUNITY REINVESTMENT ACT
PROMOTES COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS
Senator Nellie R. Santiago
Thomas T. Holyoke
Ross D. Levi
6 J.L. & Pol'y 571 (1998)
The Community Reinvestment Act ("CRA"), enacted in response to a perceived abandonment of poor neighborhoods by the nation's banks, requires banks to lend and invest a portion of their assets in the communities in which they solicit deposits and conduct their transactions. Mergers between financial institutions has become prone to allegations that banks are failing to live up to its obligations in the communities in which they do business in. Consequently, the CRA is used as a weapon in the legal battles between community based organizations and financial institutions.

However, the vague language of the CRA prompted President Clinton to instruct federal banking regulators to promulgate new rules to establish a new compliance framework. The new rules provide innovative mechanisms to enhance the role of communities in the CRA process and, at the same time, allow and encourage banks to indirectly invest in local communities through the creation of a special form of community-based institution known as a community development financial institution ("CDFI") a financial entity capable of accepting loans and investments from banks, private corporations and the government and provide a wide range of financial services to residents and businesses in its community.

The Note contends that the support received by CDFIs from private corporations and the government should translate into more financial resources for local communities in the long run. More importantly, the financial structure provided by the new rules empower the community and promotes mutually beneficially partnerships between traditionally hostile groups. Consequently, such arrangements will result in communities that are financially, economically and socially strong and independent.