Federal Deposit
Insurance Corporation

October 20, 2004

The Honorable Donald E. Powell
Chairman
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Re: RIN 3064-AC50

Dear Mr. Chairman:

We are writing in opposition to the Federal Deposit Insurance Corporation's (FDIC) proposed revisions to the regulations implementing the Community Reinvestment Act (CRA). We believe the proposal would undermine the intent of the CRA by decreasing the regulatory incentives for mid-sized banks to make investments to and provide services for underserved communities. The proposal would also mistakenly shift the focus of community development activities away from activities that benefit low-and moderate-income individuals to activities that benefit any individuals who reside in rural areas, regardless of their income.

The proposed revision would significantly increase the number of financial institutions subject to the less stringent small bank CRA examination. Because about 96 percent of the banks regulated by the FDIC have assets under $1 billion, only about 229 institutions (or about 4 percent of the 5,300 FDIC-regulated banks) would be subject to a comprehensive CRA exam under the new proposal. We are concerned that mid-sized banks that are no longer subject to the broader CRA exam would no longer have any regulatory incentives to provide investments and services that benefit low- and moderate-income individuals such as lifeline banking accounts and remittances.

Although the proposal would attempt to minimize the adverse impact of this change by subjecting banks with assets of $250 million to $1 billion to mandatory community development performance criterion, this criterion falls short. Instead of a rigorous three-part CRA exam reviewing a bank's investments, services, and lending performances, the community development criterion would allow a mid-sized bank to choose just one of three types of activities that would be subject to review under the CRA exam.

The proposal would also exempt mid-sized banks from collecting, maintaining, and reporting data on small business and farm loans that are originated or purchased by the bank. The lack of transparency on small business lending by mid-sized banks could limit the ability to hold these banks accountable for compliance with consumer protection laws and, by extension, could reduce the pressure on the banks to provide loans to small businesses and farms.

The proposal would make a sweeping change to the definition of community development activity for purposes of CRA regulations. The proposal would expand the definition of a community development activity to include activities that benefit any individuals who reside in rural areas. As such, the proposal would shift the focus of community development activities away from the activities that actually benefit low- and moderate-income individuals to those activities that benefit any individuals, regardless of their income levels. This change is fundamentally flawed and could dilute resources away from underserved populations.

For the reasons stated above, we urge you to withdraw the revised provisions implementing the CRA regulations.

Sincerely,
Toni Downes, ACSW
Executive Director