In 1977, the Community Reinvestment Act was passed for the purpose of

Question

In 1977, the Community Reinvestment Act was passed for the purpose of reducing discriminatory credit practices in low-income neighborhoods. The act required Federal financing supervisory agencies to use their authority to encourage lending institutions to meet the credit needs of all borrowers in their communities. The CRA had little impact until 1993 when the Department of Housing and Urban Development (HUD) initiated legal proceedings against lenders who declined too many applications from minority borrowers. Some argue that, while providing equal access to credit is an important aim, pressure on lenders from HUD led to practices that later caused those same lenders to be assailed as “predatory.” In Housing Boom and Bust, economist Thomas Sowell wrote that the CRA, far from being as benign as it appeared, was based on a flawed assumption: that government officials were qualified to tell banks how to lend the money entrusted to them by depositors and investors.    1 
 1. It can be inferred from the passage that

I. the CRA was perceived by some as seemingly innocuous
II. HUD had the ability to affect banking practices
III. Thomas Sowell has asserted that prerequisites exist for the act of directing banks’ lending activities

A. I only
B. I and II Only
C. I and III Only
D. II and III Only
E. I, II, and III

2 
 2. Which of the following can be inferred about discriminatory credit practices?

I. They are more common in middle-income neighborhoods than in high-income neighborhoods.
II. Legislators who voted for the CRA did so because they were opposed to such practices.
III. Critics allege that attempts to combat such practices can have unintended consequences.

A. I Only
B. II Only
C. III Only
D. II and III only
E. I, II, and III

RC Butler 2023  -  Practice Two RC Passages Everyday.   
Passage # 116 Date: 21-Apr-2023
 This question is a part of RC Butler 2023 .  Click here for Details

Manhattan GRE 5Ib.

ritikmishra2901 · Answer

Hi. I did not understand the answer for question number 2 ? I was unable to assess statement 3. Please help me out.

Nielgmat · Answer

III. Critics allege that attempts to combat such practices can have  unintended consequences .

Focus on the relevant part of the passage:-
Some argue that, while providing equal access to credit is an important aim, pressure on lenders from HUD  led to practices that later caused those same lenders to be assailed as “predatory.”

The lenders turning predatory was not the intention of the CRA. The intention of CRA was to curb discriminatory lending practices. Hence, st III can be inferred.

Hope it helps..

Sajjad1994 · Answer

Official Explanation

2. Which of the following can be inferred about discriminatory credit practices?

Explanation

You are told that discriminatory credit practices existed in low-income neighborhoods. Do not assume that there is a linear relationship wherein such practices occur most in low-income neighborhoods, less in middle income neighborhoods, and least in high-income neighborhoods. Maybe such practices exist only in low-income neighborhoods. This choice is out of scope. The second choice is also out of scope — you have no way to know what legislators were thinking or feeling when they voted for the CRA. You do have good proof for the third statement—since some argue that  pressure on lenders from HUD led to practices that later caused those same lenders to be assailed as “predatory,”  you can safely conclude that some critics think that attempts to combat discriminatory credit practices (passing the CRA and enforcing it through HUD) can have unintended consequences — in this case, replacing a lack of lending with predatory lending.

Answer: C

butter_chicken · Answer

why is D not correct for question 2?

Sajjad1994 · Answer

The passage discusses the purpose of the Community Reinvestment Act (CRA) and its impact, but it does not provide specific information about the motivations of the legislators who voted for the CRA. While the CRA was passed to reduce discriminatory credit practices in low-income neighborhoods, it does not necessarily follow that all legislators who voted for it did so because they were opposed to such practices. Legislators may have had various reasons for supporting the CRA, including a desire to promote equal access to credit, address economic inequality, or fulfill other policy goals.

Inferences should be based on the information provided in the passage, and the passage does not provide direct evidence to support statement II. Therefore, statement II is incorrect because it goes beyond what can be reasonably inferred from the passage.

As II is incorrect, so is D.

Nishant15 · Answer

can you please help me understand why 'Thomas Sowell has asserted that prerequisites exist for the act of directing banks’ lending activities' in Q1 is correct?

Avinash17081994 · Answer

Can anyone post the offical explanation of Q1.

djangobackend · Answer

I don't have the official explanation but here's mine. 1. It can be inferred from the passage that I. the CRA was perceived by some as seemingly innocuous - innocuous, benign means safe, and passage states " economist Thomas Sowell wrote that the CRA, far from being as benign as it appeared " which means that some people indeed thought of it as safe. II. HUD had the ability to affect banking practices - clearly yes since it affected lenders' practices III. Thomas Sowell has asserted that prerequisites exist for the act of directing banks’ lending activities - also yes, "flawed assumption: that government officials were qualified to tell banks how to lend the money entrusted to them by depositors and investors" - he thinks that they are not qualified and since qualifications inherently means that there must be some prerequisites to fulfil. so all 3 statements can be inferred. drop a kudos if you liked it!

PSKhore · Answer

Hi  Sajjad1994

For question#1, option 3 should state that  Thomas Sowell has asserted that prerequisites  should  exist for the act of directing banks’ lending activities
 because currently such prerequisites are not in place.

1. It can be inferred from the passage that

I. the CRA was perceived by some as seemingly innocuous 
 II. HUD had the ability to affect banking practices 
 III. Thomas Sowell has asserted that prerequisites exist for the act of directing banks’ lending activities

A. I only 
 B. I and II Only 
 C. I and III Only 
 D. II and III Only 
 E. I, II, and III

utkarshs2402 · Answer

Why is III correct for Q2?
It is mentioned CRA had unintended consequences, not necessarily "other attempts" will also have the same consequences?

Sajjad1994 · Answer

Hi utkarshs2402

The passage mentions that  "some argue"  that pressure from HUD led to practices that later caused lenders to be called  "predatory."  This indicates that critics believe the attempts to combat discriminatory practices (via the CRA and HUD actions) had the unintended consequence of encouraging predatory lending. Thomas Sowell's criticism also supports this, as he argues that the CRA was based on a flawed assumption and implies that government intervention led to negative outcomes. Hence (III) can be inferred.

In 1977, the Community Reinvestment Act was passed for the purpose of

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In 1977, the Community Reinvestment Act was passed for the purpose of

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