Mississippi Low Income Child Care Initiative
From: Carol Burnett [mailto:cburnett@mschildcare.org]
Sent: Monday, October 04, 2004 1:32 PM
To: Comments
Subject: SPAM::RIN 3064-AC50
Dear Mr. Feldman:
Below you will find comments on each of the proposed rule changes:
1) The FDIC seeks comment on whether the small bank definition
threshold of less than $1 billion is appropriate.
In Mississippi, the proposed rule change will curb the community
reinvestment activity of approximately of 170 bank branches that
hold roughly $ 4.7 billion n deposits. According to FDIC Summary
of Deposits and Statistics on Depository Institutions databases,
of the 170 bank branches that would fall under the new “small
bank” definition, roughly 130 serve rural areas.
Under the proposed rule change the 130 branches serving rural areas
would have significantly fewer requirements to engage in affordable
home lending, to invest in small businesses and to educate consumers
about managing their finances. Additionally, rural consumers often
face fewer banking choices than their urban counterparts. As rural
banks scale back community investments to the regulatory minimum,
the proposed policy will create an environment where rural consumers
increasingly turn to subprime and predatory financial institutions
to conduct financial transactions.
Given the suggested policy’s potential to diminish access
to affordable financial products in rural areas, we deem that the
proposed “small bank” definition threshold of less
than $1 billion is disproportionately targeted towards rural consumers
with fewer banking choices. We therefore recommend that the FDIC
maintain its current bank size definitions.
2) The FDIC seeks comment on whether or not a community development
performance criterion that offers choices to banks should be included
in future CRA exams.
In the FDIC notice of proposed rulemaking, the FDIC recommends
a community development criterion that the banks would choose “based
on the opportunities in the market and the banks’ own strategic
strengths.” We deem the proposed community development criterion
recommendation as insufficient.
Given the prevalence of medium size banks in rural areas, especially
in the Mississippi where 94% of the rural institutions have assets
of less than $1 billion, we strongly recommend that the FDIC maintain
its current bank size definitions. Many low- and moderate-income
rural consumers depend on medium sized banks for housing and financial
services. Medium sized banks must be held accountable for all three
components of the current CRA test – community development
lending, investing and services provided.
3) The FDIC proposes to change the definition of community development
in rural areas from a definition that “focuses on activities
that benefit low- and moderate-income individuals” to a definition
that defines community development as “activity [that] could
benefit either low-and moderate-income individuals or individuals
who reside in rural areas”
Under the proposed definition, banks would receive equal CRA credit
for a home loan to an individual residing in a high income census
tract and a first time minority homeowner living in a low-income
rural community. Given the equal credit of the two examples, banks
would naturally gravitate towards home and commercial lending deals
with perceived less risk in high income areas. Over time, low-
and moderate-income rural consumers, entrepreneurs and homeowners
would effectively be written out of rural bank priorities.
We strongly urge the FDIC not to adopt the expanded rural community
development definition. One possible way to increase community
investment in rural areas could be to more heavily rate community
development partnerships that occur between banks, nonprofits and
government entities to increase homeownership and small business
opportunities for low and moderate income residents.
Contrary to the concerns of mid-sized banks, the CRA paperwork
is not an undue burden. Over time, the CRA is an instrument that
will improve the overall performance of banks.
The FDIC has exhibited strong leadership in the Mississippi by
reaching out to unbanked and under banked populations through its
commitment to the Money Smart program. We urge the FDIC to continue
its leadership in the Mississippi by withdrawing the proposed rule
changes and supporting the CRA in its current form.
Sincerely,
Carol Burnett
Mississippi Low Income Child Care Initiative
111 Rue Magnolia, Suite 204
P.O. Box 204
Biloxi, MS
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