Such price and quantity restrictions may have

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Unformatted text preview: he maximum rates that can be charged on mortgages and/or consumer loans and regulations (now abolished) such as the Federal Reserve’s Regulation Q maximums on time and savings deposit interest rates. Such price and quantity restrictions may have justification on social welfare grounds—especially if society has a preference for strong (and subsidized) housing and farming sectors. However, they can also be harmful to FIs that have to bear the private costs of meeting many of these regulations. To the extent that the net private costs of such restrictions are positive, they add to the costs and reduce the efficiency with which FIs undertake intermediation. Consumer Protection Regulation Congress passed the Community Reinvestment Act (CRA) and the Home Mortgage Disclosure Act (HMDA) to prevent discrimination in lending. For example, since 1975, the HMDA has assisted the public in determining whether banks and other mortgage-lending institutions are meeting the needs of their local communities. HMDA is especially concerned about discrimi...
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