Federal Deposit
Insurance Corporation

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

Re: RIN Number 3064-AC50

Dear Mr. Feldman,

I have read that the NY Times has labeled the FDIC’s proposed change in CRA regulations “a drastic change”. Out of curiosity, I checked on www.fdic.gov to see if I could gain a perspective of what drastic effect this change might have in their New York City MSA.

NEW YORK NY, MSA as of June 30, 2003

I found that in the New City MSA there were 1739 banking offices representing 129 institutions. On June 30, 2003, those 1739 banking offices held $408,876,219,000 in deposits. 1,531 (88.04%) of those banking offices belong to charters whose total assets are each greater than a billion dollars and therefore are unaffected by the proposed change.  Those large banking offices hold 96.54% ($394,729,597,000) of the MSA’s deposits.  The other institutions unaffected by the proposed change have assets less than 250 million dollars and therefore already come under the small bank rules.  They hold $5,345,830,000 (1.31%) in 95 (5.46%) banking offices.  The remaining $8,800,792,000 in deposits representing 2.15% of the total deposits in the MSA are held by 28 charters in 113 offices.  Those offices average total deposits of only $77,883,000 each. Let’s consider for a moment those 113 banking offices and consider them from two perspectives.  First, is it possible, even if they never did anything with those deposits other than put them in a vault, for a mere 2.15% of the market to create a disaster of any magnitude?  I say no.  The total deposits represented by this group are so inconsequential they don’t even make a material adjustment on the combined balance sheet of the MSA’a banks.  How could their even being totally exempted from CRA regulation create anything that could reasonably be considered drastic?  They could not create anything drastic because when compared to the whole picture of their market they are insignificant and immaterial to that whole picture.  On the other hand, the more significant question is, how can these insignificant and immaterial organizations survive at all?  I propose to you the only hope they have of surviving is by becoming significant.  Further, the only way they can become significant is by doing an excellent job of meeting the true financial needs of their customer’s, and their customer’s neighborhoods to such a degree that the people of New York tell each other that these institutions are worthy of their business and support.  Further, the only hope they have of prospering is if those neighborhoods in which they reside also proper, and their best hope of that happening is through loans made to residents and small businesses in those neighborhoods.  That is because the survival of these small banks, (yes in today’s world a bank smaller than several billion dollars in assets is small) is not something that is guaranteed but something that is earned, and their CRA examination comes each day when they swing open their doors.  To fail to serve the financial needs of their community means their bank becomes truly irrelevant, and in the real world an irrelevant business soon ceases to exist.  That is marketplace CRA regulation delivered with a vengeance.  It is only when a bank becomes so huge that it no longer is dependant on its local marketplace that CRA regulation becomes a legitimate need.  Prior to that time, CRA regulation is only a burden to the bank and the community it serves because it uses up the bank’s resources in efforts to measure compliance instead of simply freeing the bank to truly serve its community’s needs.  The combined cost of time and money spent complying with CRA, for these smaller banks, means they actually will do a poorer job of meeting their community’s needs due to the waste of precious resources.  If these banks are freed from CRA regulation, the community will take care of the community CRA test because the community votes with their dollars and their feet every day.  There is no need for a regulatory body to give a moment’s thought to CRA compliance for a bank smaller than $1,000,000,000 in total assets.   This is even more true in those states the NY Times would tend to label as “the fly over states”, that is to say those states that are so insignificant in the eyes of the Times as to only take up space for them to fly over as they jet from coast to coast.  In these distant places, if the bank fails to do its duty with respect to CRA the community and the bank suffer.  Only a very foolish bank led by a very foolish board will ignore the needs of their community, and in this century, with banking charters easily attainable, and branches available where a breath of opportunity exists a bank that ignores its CRA responsibility does so at its own immediate peril.

Occasionally an individual or an organization does something that is exactly right and yet highly criticized.  However, it is extremely rare for any government agency to have the courage to do something that is labeled politically dangerous even when it is clearly the right thing to do.  I stand and applaud in honor of the FDIC, its leadership, and its board for having the courage to propose this much needed and appropriate change in CRA regulations.  It clearly demonstrates you are serious about eliminating needless regulation and I urge you to stand fast with your proposal to raise the threshold for the streamlined small bank CRA examination to one billion dollars.  Further I urge you to drop the community development criterion from your consideration.  Let the marketplace take care of this part of banking regulation.  Though brutal, the marketplace will regulate well.

Sincerely,

R. Stephen Carmack
CEO
Legacy Bank
PO Box 1038
Hinton, OK 73047