Federal Deposit
Insurance Corporation

Southern Legislative Conference

October 8, 2004

The Honorable Donald E. Powell, Chairman
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Dear Chairman Powell:

I am writing to urge you to withdraw the proposal to change the rules related to the Community Reinvestment Act (CRA) (RIN number 3064-AC50). I believe the proposal weakens the effectiveness of the CRA and will have a dramatic negative impact on low-income communities throughout the United States.

The CRA has been enormously successful in increasing assets in America's most disadvantaged communities, boosting home ownership, improving economic development and expanding small business opportunities. The proposal before the FDIC would undermine the advances poor communities have made over the past few decades by limiting the amount of capital available to them. The increase in the minimum asset size for applying the full CRA exam from $250 million to $1 billion exempts 96 percent of the banks under FDIC supervision, exempting nearly $1 trillion in assets from full review. These mid-sized banks are most dominant in rural areas and small cities, and the impact of the rule change will affect these communities disproportionately.

The proposed exam for institutions with assets between $250 million and $1 billion allows banks to select the criteria on which they will be assessed, instead of the current requirement for mid-sized banks to provide community development loans, investments, and services. The end result, I fear, will be less community development financing from this group of banks. The rule change also lifts the evaluation of the number of bank branches located in low- and moderate-income communities, which could inevitably lead to a gap in financial services available to low-income people. Rural communities in particular can little afford to lose what limited access to financial services they currently enjoy.

The changes in the rule that have been proposed run contrary to the purpose of the CRA. Significantly, among the changes are that community development activities in rural areas could benefit any group of individuals, instead of individuals with low and moderate incomes. The shift would allow banks to select only those individuals who already have resources, bypassing the very people who are most likely to benefit from the CRA.

I urge you to withdraw the proposed changes to the rule. Thank you.

Sincerely
Mac Middleton
Senator Thomas "Mac" Middleton, Maryland
Chairman, SLC Agriculture and Rural Development Committee