CHESTER PARTNERS IN HOMEOWNERSHIP
September 14 2004
Robert E. Feldman,
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As the Chair of the Chester Partners in Homeownership, a group of
government agencies, non-profit organizations and community residents
working to promote homeownership in the City of Chester, I urge you to
withdraw your proposed changes to the Community Reinvestment Act (CRA)
regulations. CRA has been instrumental in increasing homeownership,
boosting economic development, and expanding small businesses in the
minority, immigrant and low and moderate-income communities. Your
proposed changes are contrary to the CRA statute and Congress' intent
because they slow down, if not halt, the progress made in community
reinvestment.
Under the Current CRA regulations, banks with assets of at least $250
million are rated by performance evaluations that scrutinize the level
of lending, investing, and services to low-and moderate-income
communities. The proposed changes will eliminate the investment and
service parts of the CRA exam for state-chartered banks with assets
between $250 million and $1 billion. In place of the investment and
service parts of the CRA exam, the FDIC proposed to add a community
development criterion. The community development criterion would require
banks to offer community development loans, investments or services.
The community development criterion would be seriously deficient as a
replacement for the investment and service tests. Mid-size banks with
assets between $250 million and $1 billion would- only have to engage in
one of three activities: community development lending, investing or
services. Currently, mid-size banks must engage in all three activities.
Under your proposal, a mid-size bank can now choose a community
development activity that is easiest for the bank instead of providing
an array of comprehensive community development activities needed by
low-and moderate-income communities.
The proposed community development criterion will result in
significantly fewer loans and investments in affordable rental housing,
Low-Income Housing Tax Credits, community service facilities such as
health clinics, and economic development projects. It will be too easy
for a mid-size bank to demonstrate compliance with a community
development criterion by spreading around a few grants or sponsoring a
few homeownership fairs rather than engaging in a comprehensive effort
to provide community development loans, investments and services.
Your proposal would make 879 state-chartered banks with over $392
billion in assets eligible for the streamlined and cursory exam. In
total, 95.7 percent or more than 5,000 of the state-chartered banks your
agency regulates have less than $1 billion in assets. These 5,000 banks
have combined assets of more than $754 billion. The combined assets of
these banks rival that of the largest banks in the United States,
including Bank of America and JP Morgan Chase. Your proposal will
drastically reduce, by hundreds of billions of dollars, the bank assets
available for community development lending, investing and services.
The elimination of the service test will also have harmful
consequences for low- and moderate-income communities. CRA examiners
will no longer expect mid-size banks to maintain and/or build bank
branches in low- and moderate-income communities. Mid-size banks will no
longer make sustained efforts to provide affordable banking services,
and checking and savings accounts to consumers with modest incomes.
Mid-size banks will also not respond to the needs for the growing demand
for services needed by immigrants such as low cost remittances overseas.
Banks eligible for the FDIC proposal with assets between $250 million
and $1 billion have 7, 680 branches. All banks regulated by the FDIC
with assets under $1 billion have 18,811 branches. Your proposal leaves
banks with thousands of branches "off the hook" for placing any branches
in low- and moderate-income communities.
Another destructive element in your proposal is the elimination of
the small business lending data-reporting requirement for mid-size
banks. Mid-size banks with assets between $250 million and $1 billion
will no longer be required to report small business lending by census
tracts or revenue size of the small business borrowers. Without data on
lending to small businesses, it is impossible for the public at large to
hold the mid-size banks accountable for responding to the needs of
minority-owned, women-owned and other small businesses. Data disclosure
has been responsible for increasing access to credit precisely because
disclosure holds banks accountable. Your proposal will decrease access
to credit for small businesses, which is directly contrary to CRA's
goals.
In sum, your proposal is directly the opposite of CRA's statutory
mandate of imposing a continuing and affirmative obligation to meet
community needs. Your. proposal will dramatically reduce community
development lending, investing, and services. You eliminate critical
data on small business lending. Two other regulatory agencies, the
Federal Reserve Board and the Office of the Comptroller of the Currency,
did not embark upon the path you are-taking because they recognized the
harm it would cause.
If your agency were serious about CRA's continuing and affirmative
obligation to meet credit needs, you would be proposing additional
community development and data reporting requirements for more banks
instead of reducing existing obligations. A mandate of affirmative and
continuing obligations implies expanding and enlarging community
reinvestment, not significantly reducing the level of community
reinvestment.
CRA is too vital to be gutted by regulatory fiat and neglect. If you
do not reverse your proposed course of action, we will ask that Congress
halt your efforts before the damage is done.
Lisa R. Gaffney,
Chair
Chester Partners in Homeownership
Chester, PA 19016
