In 1977, Congress enacted the Community Reinvestment Act (CRA), which required federal financial regulatory agencies to encourage regulated financial institutions to help meet the credit needs of their local communities, including low- to moderate-income neighborhoods. The law specified that such community lending activity be consistent with safe and sound operation of the institutions. An institution's record of meeting the credit needs of its entire community is taken into consideration by its supervisory agency when the institution seeks to expand through merger, acquisition or branching.
In 1981, each of the 12 Federal Reserve banks established a Community Development office to work with depository institutions and the public in identifying credit needs within the community and innovative ways to address those needs. The Community Development CRA staff provides information about successful initiatives and programs for community investment; reinvestment; small-business lending; affordable housing; and community, rural and economic development.
In general, the Fed's role in Community Development is to: