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FDIC Federal Register Citations
New
Jersey Community Capital
October 19, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance
Corporation
550 17th Street NW
Washington, DC 20429
RE: RIN 3064-AC50
October 6, 2004
Dear
Mr. Feldman:
On behalf of New
Jersey Community Capital, the registered trade name utilized by Community
Loan Fund of New Jersey, Inc., and its affiliates for its financial and
consulting products and services, I would like to thank you for the opportunity
to comment on the changes to the Community Reinvestment Act ("CRA") regulations
proposed by the FDIC and how they will affect the community development
field.
As a community development financial institution ("CDFI"), New Jersey Community
Capital has a significant interest in CRA and its effects on the community development
field. New Jersey Community Capital's mission is to facilitate the flow of money
and knowledge to promote wealth and well-being in communities. Since its founding
in 1987, New Jersey Conununity Capital has committed financing for 400 projects
totaling $67 million in the housing, community services, and small business sectors.
Additionally, New Jersey Community Capital provides technical assistance to low-income
individuals and communities, as well as to organizations serving low-income individuals
and communities, throughout the State of New Jersey.
The revisions made to CRA
in 1995 have provided New Jersey Community Capital the opportunity to work closely
with banks in order to optimally serve the un-banked communities of New Jersey.
Banks represent a significant source of capital for New Jersey Community Capital,
and without their support, we would face considerable challenges in providing
financial assistance to low- and moderate-income communities. In addition to
utilizing their funds, for which we provide both financial and social returns,
New Jersey Community Capital formulates and maintains multifaceted relationships
with its bank partners. New Jersey Community Capital accepts referrals from banks
and utilizes its capital to serve customers in low- and moderate-income markets
that the banks are unable to serve. A bank's inability to serve a customer may
be due to safety and soundness concerns but, more often, is due to the costly
and time-consuming nature of providing smaller loans to less sophisticated companies.
New Jersey Community Capital is better equipped to work with customers to improve
borrower-preparedness, credit quality, and understanding of financial markets.
Because of the partnership, banks can continue to provide depository and other
non-credit services, thereby generating fee income, while being viewed by the
customer as an effective conduit for their financing needs. Further, many of
New Jersey Community Capital's customers graduate to a level whereby they are
creditworthy to a bank's standards. CRA has enabled New Jersey Community Capital
to develop and maintain these important relationships with banks, and we believe
that it will be more difficult to do so if the revised regulations are implemented.
CRA has been instrumental in increasing homeownership, advancing economic development,
and expanding small businesses in the nation's minority, immigrant, and low-
and moderate-income communities. If the proposed changes are enacted, the FDIC
will increase the asset size by which it defines small banks to $1 billion,
and streamline the review of mid-size banks (those banks having assets between
$250 million and
$1 billion) by allowing those being regulated to decide the manner in which they
are evaluated. The consequences of this change will significantly undermine the
progress that CRA has made in community reinvestment.
Under current regulations,
banks with assets of at least $250 million have performance evaluations that
review lending, investing, and services to low- and moderate-income communities.
The proposed changes assert that mid-sized banks follow a community development
criterion that allows banks to offer community development loans, investments
OR services. We believe that this will result in significantly fewer loans and
investments in low-income communities the very communities that the CRA was
enacted to serve.
Currently, mid-size banks must show activity in all three areas
of assessment. Under the proposed regulations, the banks will now be able to
pick the services convenient for them, regardless of community needs. This proposal
would remove 879 state-chartered banks with over $392 billion in assets from
an extremely effective, multi-faceted performance review of lending, investment
and service activities. This will have harmful consequences for low- and moderate-income
communities. Without the three-part examination, mid-size banks will no longer
have to make efforts to provide necessary banking services or respond to the
needs of the emerging domestic markets.
A cursory examination of New Jersey's
economic situation calls attention to the significant impact the FDIC's revised
regulations would have on the low- and moderate-income communities of New Jersey.
If enacted, only 11 New Jersey banks currently regulated by the FDIC will be
subject to the three-part exam, a drop of nearly 73%. Additionally, the total
assets subject to CRA in New. Jersey will decline by 16%, or nearly $19 billion.
These proposed changes to CRA will not only reduce the amount and form of capital
dedicated to low- and moderate-income communities, but also weaken the opportunity
for New Jersey Community Capital to work in conjunction with mainstream financial
institutions on viable community development projects.
Creativity and innovation
are essential to the development of appropriate financial products and services
for the nation's disinvested communities. By weakening CRA, the FDIC will allow
mainstream financial institutions to choose the path of least resistance in their
community development activities. In light of the needs of low- and moderate-income
communities, I must respectfully request the proposed changes to CRA be withdrawn
from consideration.
Sincerely
David M. Scheck
Executive Director
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