Federal Deposit
Insurance Corporation

Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429

RE: RIN 3064-AC50; Notice of Proposed Rulemaking to 12 CFR Part 345

Dear Mr. Feldman:

We appreciate the opportunity to provide comments to you on the Federal Deposit Insurance Corporation’s (FDIC) proposed revisions to the Community Reinvestment Act (CRA). Our collective associations represent the interests of thousands of city and county agencies across the country that administer affordable housing and community development programs for low- and moderate-income families. As such, we are deeply concerned by the effect of the changes recommended in the above referenced rulemaking on low- and moderate-income households.

We oppose the proposed change to the definition of “small bank.” Currently, a small bank is defined as a bank that has assets of $250 million or less. This proposed rule would increase this asset threshold to $1 billion, thereby allowing banks that are now classified as “large banks” to fall under the small bank definition. This will eliminate approximately 900 banks from having to undergo a full CRA examination. In all, with this proposed rule, 96% of the FDIC’s banks will be exempt from full CRA review with only 223 of the 5,291 banks supervised by the FDIC receiving a full CRA review. Furthermore, unlike large banks, small banks are not subject to the investment and service tests of the CRA. We fear that this will result in less investment in low- and moderate-income communities. To make up for the loss in the investment and service tests, the FDIC proposes to add a mandatory community development criterion for small banks with assets between $250 million and $1 billion. Under this new criterion, the FDIC will assess a bank’s record of helping to meet the needs of its assessment areas through a combination of its community development lending, qualified investments, or community development services. This new criterion would focus on the entire community and not have any special reporting for low- and moderate-income households or businesses. Besides the fact that this criterion does not meet the requirements of the CRA in terms of reporting on low- and moderate-income households and businesses, it is a poor replacement for the investment and service tests which require banks to meet a broad range of investments and services for low- and moderate-income communities. Again, the very communities that CRA was enacted to protect will fall victim to less investment if this proposed rule becomes final.

Congress enacted CRA in 1977 specifically to ensure that banks and thrifts met the lending, investment, and service needs of low- and moderate-income households in their communities. We believe that the CRA has been the driving force behind increased lending, investment, and banking services in previously underserved communities. While we believe that most banks are concerned with meeting the needs of their entire communities, the reality is that there are some banks that would turn a blind eye to the needs of minority and low-income neighborhoods, unless forced to meet the needs of these households by such tools as the CRA. Now, this proposed rule serves to weaken these protections for these households. Changing the definition of “small bank” to raise the asset size threshold will eliminate hundreds of existing banks from having to undergo a full CRA examination. Since these banks will no longer be subject to the investment and service tests of the CRA, we strongly believe that this action will result in decreased investment and economic opportunity in minority and low-income communities. Keeping the focus of small banks on lending alone is not consistent with the purposes of the CRA.

Besides our concerns with the proposed rule, we are deeply concerned that the FDIC is attempting to change existing law – the CRA – through regulation. If changes are made to the CRA, it should not be done under the auspices of a few Federal agencies which choose to decide which comments to accept in a proposed rulemaking. Instead, it should be done in an open hearing before Congress where all sides can fairly offer their opinions of the CRA and the merits of the Act can be questioned in an open format. It is for this reason – and the others mentioned above – that we are opposed to this proposed rulemaking and ask the FDIC to withdraw it immediately.

We appreciate the opportunity to provide comments to you on this proposed rule.

Sincerely,

National Association for County Community and Economic Development
National Association of Counties
National Association of Local Housing Finance Agencies
National Community Development Association
U.S. Conference of Mayors