Federal Deposit
Insurance Corporation

City of New York Department of Housing Preservation & Development

October 20, 2004

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

Subject: Federal Deposit Insurance Corporation (FDIC) Community Reinvestment Notice of Proposed Rulemaking: Docket No. RIN 3064-AC50

Dear Mr: Feldman:

On behalf of the City of New York, the New York City Department of Housing Preservation and Development (HPD) wishes to comment on the Federal Deposit Insurance Corporation (FDIC) Community Reinvestment Notice of Proposed Rulemaking [Docket No: RIN 3064-AC50], which was published in the Federal Register on August 20, 2004. In the notice, the FDIC proposes revisions to 12 CFR 345, implementing the Community Reinvestment Act (CRA), that would: (a) change the definition of "small bank" to raise the asset size threshold to $1 billion regardless of holding company affiliation; (b) add a community development activity criterion to the streamlined evaluation method for small banks with assets greater than $250 million and up to $1 billion; and (c) expand the definition of "community development" to encompass a broader range of activities in rural areas, among other options.

HPD is the nation's largest municipal housing agency, and is the administrative grantee of HUD's HOME Investment Partnership grant to New York City, which in 2004 was over $128 million. HPD is also the fourth-largest Public Housing Agency administering Housing Choice Vouchers. In addition, HPD is the primary user of federal Community Development Block Grant (CDBG) funding for New York City. The City of New York has a long and productive history of using its federal-source funding, combined with state, local and private funds, to assure that affordable housing opportunities are made available to the neediest New Yorkers. Mayor Michael R. Bloomberg's plan, "The New Housing Marketplace: Creating Housing for the Next Generation, " commits to funding the new construction or rehabilitation of 65,000 homes and apartments from fiscal years 2004 through 2008.. The City's challenges can be met by fostering mixed-income communities, transforming derelict former industrial areas, and encouraging the development of new housing and investment in our existing housing stock. HPD's success depends in part on innovative partnerships, which involve the use of leveraged private funds that are often covered by the Community Reinvestment Act.

As currently administered, CRA has been an important component in providing affordable housing, revitalizing distressed communities, and fostering economic development throughout New York City and State. HPD concurs with the assessment in Representative James T. Walsh's letter of September 15th to FDIC Chairman Donald E. Powell that FDIC's proposed changes in the CRA regulations will reduce the incentives to some banks to make important investments in our communities. In New York City, seven of the 27 FDIC-regulated banks currently receive the small-bank exam (as they have assets under $250 million). However, under the proposed rule, an additional ten banks would also receive the small-bank exam (they have assets between $250 million and $1 billion). Altogether, this would mean 17 of 27 FDIC regulated banks, or 63%, would get the easier, truncated exam.

We are particularly concerned that, as Representative Walsh wrote: "if this proposal were to be adopted, CRA reviews would not hold banks accountable for investing in Low Income Housing Tax Credits, a major source of affordable rental housing for low-income working families." The LIHTC is an important tool of affordable housing development in New York City. 24,146 apartments in projects financed with investments generated by the Low Income Housing Tax Credit accounted for fully one-fourth of New York City's increase in renter-occupied housing during the last decade.

Across the country, raising the small bank threshold from $250 million to $1 billion would exempt thousands of FDIC-insured banks from meeting the current CRA standard that requires them to demonstrate investments and services in low- to moderate-income areas.

We appreciate your attention to this important matter. Please contact Harold M. Shultz at (212) 863-6070 if you have any questions. We look forward to your response.

Sincerely,

Shaun Donovan
Commissioner