UK Wants To Adopt Equivalent Of Our Community Reinvestment Act

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Without going into the pros and cons here, all we’ll say is that this story will be something of a litmus test about your political suppositions, and views of what caused the financial crisis.

The Guardian: Liam Byrne, chief secretary to the Treasury, said last week that the time was ripe to consider a UK version of America’s Community Reinvestment Act, introduced in the 1970s to prevent banks abandoning deprived areas.

The CRA has resulted in American banks lending billions of dollars in rundown inner-city districts, and, with public anger at the activities of financial institutions running high, Byrne said he was actively considering a similar scheme for Britain.

“It is an interesting idea, which we are exploring earnestly at the Treasury,” he told a fringe meeting at last week’s Labour conference in Brighton.

What’s interesting — again, we’re avoiding politics completely here — is the motivation for this:

The chief secretary added that there were two issues that worried him and his Treasury team – the lack of any hard evidence that particular communities were being frozen out by the British banking industry, and concerns that CRA-induced lending to poor households in the US had triggered the sub-prime crisis.

“These are serious questions for us to explore,” Byrne said. “But we wouldn’t be looking at it if we didn’t think it would be a good idea.”

So there’s no evidence that a CRA-like law is necessary. And there’s some concern that the law in the US had a role in the subprime crisis, and yet they’re considering it seriously at the Treasury. Why? As stated above: As a countermeasure to deal with anger at the banking system.

Yes, that sounds like a GREAT reason to introduce such a rule (whoops, slipped into judgment there).

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