Federal Deposit
Insurance Corporation

November 22, 2004

Mr. Robert Feldman
Executive Secretary
Attention Comments/Legal ESS
Federal Deposit Insurance Corp.
550 17th Street NW
Washington DC, 20429-9990

Dear Mr. Feldman;

Re: RIN 3064-AC50

I am a local citizen involved in community development in Southern California and operate a consulting firm in the field of community development. I havee also served on a number of local government advisory committees related to revitalization of inner city neighborhoods. I have worked in government, commercial banking and the public sector. Among my work experience was as a commercial real estate lender in affordable housing and community development for twelve years. The purpose of this letter is to strongly discourage your plan to modify the threshold for CRA examination to dilute Community Reinvestment Act requirements for institutions with assets less than $1B. The reduced requirements would include modification of testing requirements on the number of investments and services in low and moderate-income areas. The second is to allow mid sized banks reduce their community development activities.

This ruling would apply to all locally headquartered banks in San Diego. It would only exclude the very largest national banks thereby creating an unequal playing field in the banking industry in this region. It would allow for market domination in major geographical areas of the County for specific products and services. It would exclude ethnic and lower income residents from basic banking services and thereby be in direct violation of the federal Community Reinvestment Act and quite possibly the Fair Housing Act.

The effect is to allow smaller banks to act as they have historically done in terms of CRA compliance. They have traditionally displayed little obligation to the broader community. Branches are almost exclusively located in suburban, wealthier communities. The smaller banks very seldom participate in regional consortia nor do they directly offer products or access to basic banking services.(1)

Your decision will legitimatize the historical exclusionary lending policies of these institutions.

Smaller banks in San Diego are a growth industry. Over the thirty years there have been three generations of new, small banks emerge and then merge with larger ones. We simply grow local banks for consumption by the larger, regional and national banking institutions. This is part of the reason that these banks eschew CRA. It may interfere with their purchase by larger banks. The small banks exist not for the benefit of the consumer but rather for a select number of shareholders. CRA regulations (however limited) are the only link to the larger community required by a bank charter.

The City/ County Reinvestment Task Force (RTF) is chartered by the City Council and County Board of Supervisors to monitor lending practices and develop strategies for reinvestment in the region. It was established by joint resolution in 1977 and is Co-Chaired by the City Council and the County Board of Supervisors. It has an extraordinary record of success in facilitating access to capital in underserved markets generating billions of home loans, small business loans, affordable housing and community investments ($1.9B in 2003). Through local attention to the CRA and long term strategic planning and analysis the CRA has become one of the primary tools for community stability and revitalization in the region. These accomplishments occur because of the “partnership’ that has been forged between community, lenders and government. The partnership depends on each party bringing its full authority and potential to the work.

Government has provided much protection and risk diversion with affordable housing, investments and small micro lending efforts. This was offered with the confidence that the lenders would equally commit. The RTF has done constant and disciplined assessment of credit access and through face-to-face dialogue, many new and innovative solutions have been created, so much so that a thriving and profitable “industry” has emerged in this region focused on economically healthy communities.

I urge you to rescind your intent to reduce CRA related policies toward smaller banks. You will exclude them from very beneficial markets and encourage recognition that they are part of a larger community and can contribute to the regions overall economic growth.

Sincerely,
Mitch Thompson