Federal Deposit
Insurance Corporation

Community Development Bankers Association

October 19, 2004

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington DC 20419

RE: Notice of proposed rulemaking on 12 CFR Part 345, Community Reinvestment Act

Dear Mr. Feldman:

I am writing on behalf of the members of the Community Development Bankers Association (CDBA) and Community Development Banks (CDBs) across the United States to comment on the Notice of Proposed Rulemaking for 12 CFR Part 345 implementing the Community Reinvestment Act (CRA).

CDBA represents the interests of our nation's network of FDIC-insured banks and thrifts that have a primary mission of promoting community development and revitalizing distressed inner city and rural communities. CDBA was organized in 2001 for the purpose of facilitating the revitalization of disinvested low-income communities and promoting the growth and development of CDBs that are U.S. Department of Treasury certified Community Development Financial Institutions (CDFIs). CDBs are strongly committed to providing access to capital and financial services to businesses and residents located in some of the nation's most distressed communities.

As CDBs, the members of CDBA are in a unique position to comment on the proposed rule. We all share a common mission and commitment to revitalization of low-income communities and ensuring access to capital and financial services to people that are often under served by the traditional financial services sector. We are also FDIC insured and regulated banks and thrifts that are required to meet the standards and requirements applied to all Federally insured financial institutions. We are highly sympathetic to concerns of community groups that fear the proposed rule will significantly weaken CRA and harm communities. At the same time, we are sympathetic to the concerns of small banks about managing the challenges of regulatory burden, because we acutely understand and are subject to the same reporting and compliance requirements.

We appreciate the FDIC's intent of reducing regulatory burden on small banks. On balance, however, we believe that the proposed rule published in the Federal Register on August 20, 2004 raise public policy issues that are of such importance that the rule making process should be opened for further discussion with all groups that would be affected to ensure that important community development objectives are accomplished, as well as lessening the regulatory burden to small banks that the agency is targeting. We object to changing of the definition of "small" bank to $1 billion, as proposed in the current rule. The original small bank exemption of $250 million for a streamlined examination procedure was put into put over 10 years ago. We agree with both banking and community activists that argue that it is time to review and update these regulations. While we agree with banking industry views that the current regulatory and paperwork burden imposed on small banks is onerous. At the same time, we believe that regardless of the mission, all banking institutions have an affirmative obligation to serve all citizens in their communities regardless of income, race, gender, and ethnicity. We believe that CRA has served as an effective tool for ensuring this important public policy objective is met.

While as small banks, CDBs could selfishly support and benefit from the proposed reduced reporting requirements of CRA, our mission and beliefs as Community Development Financial Institutions compel us to focus on the common good and needs of the communities we serve. Since implementation of the current rule nearly a decade ago, the field of community development finance has advanced significantly. This has transformed communities, improved the lives of real people, and disproved long-held misperceptions about the credit worthiness of low-income people and communities abandoned by the traditional financial services industry. Today, customers once ignored by the traditional financial services industry are considered "good business" by mainstream banks. The proposed rule will slow down future progress for the industry.

We urge the FDIC to update the current CRA regulations. However, the short time frame of the comment period severely limits the ability of concerned parties to discuss and offer thoughtful suggestions on how to improve the current CRA regulatory framework. We urge the FDIC to refrain from implementation of the proposed rule and engage the banking industry, community groups and other stakeholders in a real and substantive dialogue about how to reduce regulatory burden while improving the effectiveness of CRA in meeting community needs.

We thank you for consideration of our views on this matter. Thank you for the opportunity to comment on the proposed rule.

Robert M. McGill
Chairman, Board of Directors
Community Development Bankers Association