Federal Deposit
Insurance Corporation

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

RE: RIN 3064-AC50

Dear Mr. Feldman:
The Coalition on Human Needs wishes to express its opposition to the proposed changes to the Community Reinvestment Act (CRA) regulations. We urge you to withdraw them.

The Coalition on Human Needs is made up organizations concerned with the needs of low-income people and communities. Our members include faith-based groups; service providers; civil rights organizations; labor; policy experts in areas including nutrition, housing, health, and social services; and advocates for children and senior citizens. We are alarmed that you are considering undermining CRA’s effectiveness in increasing investments in low-income communities. These communities need financial institutions to continue to lend, make investments, and provide financial services. This is urgently important now, when job creation has been so sluggish and the level of employment is so much lower than it has been historically at this point in an economic recovery. The proposal would drastically weaken the current law, eliminating the requirement that financial institutions with assets of between $250 million and $1 billion are rated on all three of the following criteria: their level of lending, their investments, and their services in low- and moderate-income communities. Under the proposal, banks of this size could satisfy the requirement by engaging in only one of the three activities.

According to the National Community Reinvestment Coalition, the weakened requirements would apply to 96 percent of the banks supervised by the FDIC. These 5,000 banks have $754 billion in assets. The banking industry has enjoyed record profits in recent years; some of these profits have resulted from increased consumer fees that are difficult for low- and moderate-income families to absorb. If the regulations now in place are weakened, it will almost certainly become more difficult for low-income families to find convenient, affordable banking services. They need relief from payday loans and check-cashing fees; this proposal would make things worse.

The Coalition on Human Needs has long been concerned about the large numbers of low-income families who pay too much for housing. One in seven households in the U.S. is paying more than half of its income on housing costs. Solving this problem requires access to lending for those who can manage to purchase a home. It also means investments in low-income rental housing. The proposed changes to the CRA regulations would reduce lending and investments. We believe that would be dangerous for already over-burdened families and communities, and directly contrary to the Bush Administration’s commitment to increase home ownership.

We are also concerned that a crucially important anti-discrimination tool is threatened by the proposed weakening of CRA regulations. Black and Latino communities have suffered from lack of investment; the CRA has been responsible for progress that this proposal would undermine.

Banks affected by the proposal now make about $4 billion in community development investments every two to three years. The National Community Reinvestment Coalition estimates that half of these investments would be lost if the proposal is adopted. When the gap between the rich and poor is growing and real weekly wages have been stagnant since 2001, it is wrong to gut a successful engine of development in low-income communities.

We are also concerned about the effect of this proposal on rural communities. Ninety-nine percent of the banks supervised by the FDIC in rural areas would be exempted from the current three-test standard. Banks in rural areas would no longer be required to target investments to low/moderate-income people to earn points towards their CRA ratings. Investments in golf courses would count.

In a recent analysis by the Coalition on Human Needs, we noted that nearly one-third of all American families have incomes below $35,000 a year. They need more affordable housing, accessible banking services, community health and child care centers and other community investments to enhance their opportunities to succeed. Many of these families will be hurt by your proposal. We hope you will follow the lead of the Federal Reserve and the Office of the Comptroller of the Currency in rejecting these dangerous changes to the CRA regulations.

Sincerely yours,

Deborah Weinstein
Executive Director,
Coalition on Human Needs