Federal Deposit
Insurance Corporation

From: Abbie McBride [mailto:amcbride@liifund.org]
Sent: Wednesday, September 15, 2004 3:43 PM
To: Comments
Cc: Mark Pinsky (E-mail); Judith Kennedy (E-mail); Nancy O. Andrews
Subject: Community Reinvestment -- RIN 3064-AC50

***VIA EMAIL***

September 14, 2004

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429

RE: RIN 3064-AC50

Dear Mr. Feldman:

The Low Income Investment Fund (LIIF) urges you to withdraw your proposed changes to the Community Reinvestment Act (CRA) regulations. CRA has been instrumental in increasing homeownership, boosting economic development, and expanding small businesses in the nation's immigrant, low- and moderate-income, and people of color communities.

LIIF is a national community development financial institution (CDFI) based in Oakland, California with offices in Los Angeles, San Francisco and New York City. LIIF specializes in providing capital and technical assistance to organizations working to alleviate poverty in low income neighborhoods. Since its inception in 1984, LIIF has provided approximately $440 million in financing and technical assistance for projects benefiting low income communities, leveraging investments over $3.4 billion. These projects have made a significant difference in the lives of low income families, supporting:

* 48,000 units of low income and special needs housing (75
percent serving very-low income people),

* 17,200 child care spaces,

* 2,000 school spaces, and

* 1.7 million of commercial space.

LIIF, and more importantly the communities and people that we serve, have benefited greatly from CRA. CRA has been a powerful impetus for loans to community development organizations from private capital markets. It has brought millions of private dollars to the country's neediest communities to leverage public funding.

Under the current CRA regulations, banks with assets of at least $250 million are rated by performance evaluations that scrutinize their level of lending, investing, and services to low and moderate-income communities. The proposed changes will eliminate the investment and service parts of the CRA exam for state-charted banks with assets between $250 million and $1 billion. In place of the investment and service parts of the CRA exam, the FDIC proposes to add a community development criterion. The community development criterion would require mid-size banks with assets between $250 million and $1 billion to engage in only one of three activities: community development lending, investing or services. Currently, mid-size banks must engage in all three activities.

Under the proposed changes, there would be no requirements for banks with up to $1 billion in assets to engage in community development lending and investments-activities that leverage limited public subsidies to provide affordable housing and community and economic development. Without this regulatory impetus, many institutions will significantly reduce their activity in low income communities because, in general, they view such activity as higher risk and/or less profitable than more traditional investing.

The FDIC proposal would significantly harm community development activities across the country. As an example, if enacted, 122 of banks in California, or 84 percent of the State's institutions, would be eligible for the streamlined exam. Meanwhile, 89 percent of California's rural financial institutions would become eligible for the reduced community development requirement. The FDIC's proposal would eliminate the small business lending data reporting requirement for mid-size banks. Mid-size banks with assets between $250 million and $1 billion will no longer be required to report small business lending by census tracts or revenue size of the small business borrowers. In sum, the FDIC's proposal is directly opposite CRA's statutory mandate of imposing a continuing and affirmative obligation to meet community needs. The proposed changes will dramatically reduce community development lending, investing, and services. The proposal will particularly affect rural areas least able to afford reductions in credit and capital. Eliminating critical data on small business lending will also result in further reductions to the amount and type of small business lending. The Federal Reserve Board and the Office of the Comptroller of the Currency have recognized the harm this proposal would cause.

CRA is a vital reinvestment tool. If the FDIC refuses to reverse this proposed course of action, we will ask that Congress halt your efforts.

Sincerely,

Nancy O. Andrews
President and CEO

cc: Judy Kennedy, President, National Association of Affordable Housing Lenders
Mark Pinsky, President & CEO National Community Capital Association