Federal Deposit
Insurance Corporation

October 18, 2004

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St., NW
Washington, D.C. 20429 RE: RIN 3064-AC50

Dear Mr. Feldman:

As President and CEO of the National Urban League, and as the Chairman of the newly launched Urban Entrepreneur Partnership, I am writing to urge you once again to withdraw the proposal of the Federal Deposit Insurance Corporation (FDIC) to quadruple (to $1 billion) the minimum asset size for applying the full Community Reinvestment Act (CRA) exam to state chartered non-member banks.

In our joint letter of October 6, 2004, the National Urban League and over 50 other national community reinvestment, civil rights, affordable housing, consumer, and labor organizations, stated that the proposed change in the CRA regulations would have a devastating impact on lending, housing, and access to financial services in urban and rural communities across America. The CRA has been instrumental in increasing homeownership, boosting economic development, and expanding small businesses in the nation’s minority, immigrant, and low- and moderate-income communities.

The FDIC proposal would dramatically diminish banks’ obligation to reinvest in their communities. It revises the CRA rules to make the less rigorous CRA exam applicable to an additional 900 banks with assets totaling $401 billion. Adoption of the FDIC measure is likely to mean the loss of hundreds of millions of dollars in loans, investments, and services for local communities and would disproportionately impact rural areas and small cities where the market presence of these mid-sized banks is often great.

Among other key concerns cited in our October 6, 2004, letter about the proposed FDIC rule is the concern that it would greatly weaken or eliminate extremely important standards necessary to ensure that CRA is effective. The proposed change would weaken the lending test and also eliminate the investment and service parts of the CRA exam for FDIC supervised banks that have assets between $250 million and $1 billion.

Another key concern is the FDIC plan to add a weak and trivial community development criterion in lieu of the investment and service tests applicable today (that collectively count for 50 percent of a bank’s CRA grade). This is a wholly inadequate substitute for the present exam standards. The new factor permits these banks to satisfy the community development criterion by choosing whether to provide community development loans, investments or services instead of assessing their performances for all three categories, as is currently required. This change is likely to result in a significant drop-off of lending, investments and services for affordable housing development, Low Income Housing Tax Credits, community service facilities such as clinics, and economic development projects.

Other harmful elements of the FDIC proposal include the dramatic weakening of the lending test for midsize banks which could decrease access to credit for many Americans. We also fear that the elimination of the service test will have harmful consequences for low- and moderate-income consumers. According to the FDIC data, the rule change would mean that only 223 of 5,291 (about 4%) of all FDIC-supervised banks would continue to receive the full CRA exam. And finally, the FDIC proposal and the rule recently adopted by the OTS diminish the CRA requirements for midsize banks and work at cross-purposes with the Act’s statutory mandate. As you know, this mandate requires that banks, regardless of their asset size, have a continuing and affirmative obligation to serve the credit and deposit services needs of their local communities, including low- and moderate-income areas.

On October 15, 2004, I announced at the National Press Club a new groundbreaking national partnership to encourage minority entrepreneurship and business development nationwide. The new Urban Entrepreneur Partnership aims to increase access to capital and create jobs in historically neglected and economically underserved urban areas by combining private, public and non-profit sector resources to develop one-stop economic empowerment centers. The centers will provide business training, counseling, financing, and procurement opportunities to minority and urban business owners. The first 5 centers will launch in early 2005 and will be located in Atlanta, Cincinnati, Cleveland, Jacksonville and Kansas City with up to 15 more by the end of 2006. This historic partnership is the result of a great collaborative effort that includes the White House National Economic Council, the Ewing Marion Kauffman Foundation, the Business Roundtable, the Minority Business Development Agency, the Small Business Administration, the Stonehenge Community Development Fund, and others.

I believe that growing small and medium-sized minority owned businesses is one of the best ways to close the wealth gap in America and provide real economic empowerment to our communities. In light of our groundbreaking initiative, I am deeply concerned that the proposed FDIC rule would seriously undermine this great effort at the starting gate. We should be strengthening the CRA, not weakening it! Therefore, I urge you once again to withdraw the FDIC proposal.

Sincerely,
Marc H. Morial
President and CEO, National Urban League
Chairman, Urban Entrepreneur Partnership