Community development banks (CD banks) are banks that include in their mission the specific goal of serving underserved communities. Given this mission, they should score well, indeed better, than regular financial institutions on this service. Yet recently questions have been raised about whether community development banks, along with other kinds of community development financial institutions (CDFIs), have demonstrated their effectiveness. Specifically, the U.S. Treasury Department has in the last several years asserted that CDFIs have not produced evidence of effectiveness. Since 1996, the Treasury Department has been an important funder of CDFIs, so this criticism has very practical consequences for the level of federal funding for community development banks. It also has implications for the current federal review of the Community Reinvestment Act (CRA) regulations, particularly the debate about whether the existing tripartite division of CRA examinations into lending, investment and service tests, should be maintained. Community development banks receive important investments from other banks that in turn receive credit under the investment test portion of CRA examinations. Many community reinvestment groups and some bankers suspect that the adoption of one proposal, the merging of the three tests into a lending test and a community development test, would diminish the importance of investment into CDFIs. There are several ways to measure the effectiveness of community development banks. However, the underlying premise about their utility is that some populations remain underserved by financial institutions. A recent and comprehensive analysis of community reinvestment from the Joint Center for Housing Studies at Harvard University shows that while the percent of minority and lower income populations receiving home mortgage loans increased considerably between 1993 and 2000, muh of that increase was accounted for by subprime and government backed loans.4 While these loans reach populations that may not qualify for conventional financing, these loan products have disadvantages compared to conventional financing. A portion of subprime loans are very high cost, very high fee loans called predatory loans. The report goes on to assert that there is recent evidence that discriminatory practices still persist in the housing marketplace. It is clear, therefore, that some populations remain underserved by financial institutions. So the question is, do community development banks outperform their peers in serving these populations and if so, by how much?