Federal Deposit
Insurance Corporation

January 6, 2005

Office of the Comptroller of the Currency
 250 E Street SW, Mail Stop 1-5
Washington DC 20219
RE: Docket No. 05-17

Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington DC 20551
RE: Docket No. OP-1240

Robert E. Feldman
Executive Secretary
Attention: Comments, RIN 3064-AC97
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington DC 20429

Washington DC 20429

To Whom it May Concern:

I work as the Vice President of Research and Policy at the National Community Reinvestment Coalition (NCRC). NCRC has submitted a detailed letter on the guidance. I am compelled to write an additional letter because of the need to address a fundamental flaw in the argument of the comment letter of the Independent Community Bankers of America (ICBA). The ICBA states that a renewed emphasis on low- and moderate-income borrowers and communities in the proposed Questions and Answers is problematic and burdensome because data on serving low- and moderate-income borrowers is difficult to generate. This argument basically asserts that CRA should cease directing banks to serving low- and moderate-income communities because data collection is difficult. In other words, CRA's affirmative obligation to serve low- and moderate-income communities and borrowers is trumped by data shortfalls.

I quote the ICBA's paragraph that introduces the theme that too much emphasis is placed on serving low- and moderate-income consumers and communities.

However, the ICBA is concerned that the guidelines may place too great an emphasis on activities that benefit low- and moderate-income individuals. While it is appropriate to encourage institutions to undertake activities that benefit low- and moderate-income individuals, difficulty in obtaining data to substantiate this was one of the problems the revisions to the CRA rules was designed to correct. In many nonmetropolitan areas, low- and moderate-income census tracts are not segregated as they are in large metropolitan areas, and identifying low- and moderate-income individuals may not be easily accomplished. Community banks may conduct activities that benefit an entire community but may not have sufficient data to demonstrate the particular benefit to low- and moderate-income individuals. That was one of the problems the revisions were designed to address, but the guidance seems to backtrack and reintroduce the problem. ICBA is concerned that guidance might divert resources from activities that would benefit local communities if it is impossible or burdensome to demonstrate a benefit to low- and moderate-income individuals, even though the benefit may be there. ICBA recommends that the guidance provide that an activity that benefits an entire community will be granted credit under CRA.

Life support and heroic efforts to save the patient would fail to keep alive this old and tired argument. Firstly, CRA and HMDA data identify low- and moderate-income individuals and census tracts receiving loans. Banks know which census tracts in rural areas are low- and moderate-income and therefore can identify community development projects to finance in these tracts. Moreover, the regulators have expanded the range of census tracts by identifying middle-income census tracts in distressed or underserved rural counties in which banks can finance community development projects and receive CRA points. This expansion for distressed or underserved middle-income areas is enough. Banks and their trade associations cannot legitimately assert that CRA points should be awarded to any project because data is not obtainable, when in fact data by income level of census tracts is available.

The burden argument amounts to an excuse for not serving low- and moderate-income borrowers. With each passing year, computer technology improves by leaps and bounds. Nonprofit organizations can track the income levels of their clientele. Why can't banks, with much greater resources than nonprofits, determine the income levels of their customers for deposit products and other services. Despite the claims of the ICBA letter, I imagine a good number of community banks keep careful track of the demographics of their customers so that they know how to market their products.

ICBA also asserts that the emphasis on low- and moderate-income borrowers and communities are not appropriate for directing bank activities after natural disasters since "natural disasters do not make distinctions based on income levels." While natural disasters do not make distinctions based on income levels, unfortunately humankind does make such distinctions. The experience with Hurricane Katrina makes abundantly clear that low- and moderate-income families are least likely to have adequate flood insurance or other protections against foreclosure and massive loss of wealth. Oftentimes, low- and moderate-income families lack flood insurance, not due to their negligence, but because they were incorrectly advised that they did not need it. In other words, market failure and incomplete information leaves low- and moderate-income families especially vulnerable. Directing bank financing towards low- and moderate-income families after disasters is not only appropriate, it must be part of the CRA regulation and guidance.

The regulators have previously rejected awarding CRA points for any project in rural areas and have withdrawn proposals that would have done so. The regulators have realized that awarding CRA points to any project would subvert CRA's purpose of combating redlining by directing lending and investing to low- and moderate-income communities experiencing discrimination and market failure. The ICBA is clinging to an old and false claim of data unavailability to justify a new subversion of CRA's solemn and affirmative mandate for banks to serve low- and moderate-income borrowers. I hope that you stand firm on your proposed Questions and Answers that focus on low- and moderate-income families and communities. An emphasis on low- and moderate-income families and communities is the heart and soul of CRA. Please preserve that.

Sincerely,

Josh Silver
Bethesda MD