Federal Deposit
Insurance Corporation

Genesis Community Loan Fund

October 19, 2004

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:

Thank you for the opportunity to comment on the proposed rule changes to the Community Reinvestment Act.

The Community Reinvestment Act (CRA) has been a critical tool for increasing access to capital and financial services in low-income communities. It has also helped spark investment in a wide range of community development initiatives that have made critical differences in the lives of low-income families. The CRA is also an important counterbalance to the wave of bank consolidation and centralized decisionmaking fostered by the Financial Modernization Act of 1999. Indeed, in Maine the number of banks under FDIC review has decreased by 21% since 1995. These banks have increased total assets from $4.2 billion to $9.4 billion during the same period of time. Clearly the ability to offer a wider range of services combined with the efficiency gains of bank consolidation, automated service delivery, and more central decisionmaking have enabled these banks to become more profitable, but at whose expense? To insure that rural communities are not put at a greater risk, I urge you to maintain the current threshold for large banks at $250 million and to preserve the current definition of “community development.”

The Genesis Fund is a small community development loan fund that supports the development of affordable housing and community facilities throughout Maine. Historically Genesis has relied on investments from individuals and religious organizations to create a revolving loan fund from which to make community investments. These investments help bridge the gap between traditional sources of financing and the amount required by nonprofit organizations to address community needs. In over twelve years of making loans for community projects, we have never experienced a loss in our portfolio. As demand for Genesis financing has increased, we have had to look to other sources to increase our lending capacity.

In the last year and a half, 92% of the growth in our loan fund can be attributed to investments from bank partners many of whom freely admit that the CRA is the overriding reason for their support of our work. Absent a strong CRA, groups like Genesis would be unable to meet the capital needs of vital community projects projects that provide access to housing, deliver services, and support the sustainability and enhanced quality of life for rural communities. Under the proposed rule change, only one bank currently reviewed by the FDIC in Maine would continue to be held to the higher standard of the “large bank” test. Fifteen Maine banks meet the current threshold. Of these, six have qualifying investments in Genesis. Five of these investments were made within the last year and a half. In several instances, these investments came from banks that have come under the “large bank” criteria since 1995.

Our experience offers insight into the need to maintain the current threshold and into the flaws inherent in the proposal to streamline the evaluation method for banks with assets between $250 million and $1 billion. In several instances, the banks making investments in Genesis had recently met the $250 million asset threshold and were seeking opportunities to meet each of the three test areas. The consensus among these banks was that the investment test was the most challenging to meet and that Genesis provided a significant opportunity to make a qualified investment. Under the proposed guidelines, it seems likely that these banks would have opted out of the investment test. As a result, a number of communities would not have been able to obtain the resources they needed to meet the housing and service needs of low-income, elderly, and disabled individuals and families. Additionally, the proposed expansion of the definition of “community development” would have meant that these resources, where available, would not be targeted to areas of critical need as they are at present.

On behalf of the rural communities that Genesis serves, we urge you to:

• Maintain the “large bank” threshold at $250 million in assets;
• Avoid watering down the impact of CRA through the promotion of a streamlined examination method for banks with assets between $250 million and $1 billion; and
• Keep the current definition of “community development.”

In its deliberations over the proposed rule changes, I hope that the FDIC will consider the changes that have occurred in the financial services sector within the last five years. The FDIC’s concern with asset size masks the reality of significant consolidation and centralization that is making it harder, not easier, for isolated rural communities to obtain needed financial services. The Community Reinvestment Act is one of the few pieces of legislation ensuring that banks remain accountable not only to their shareholders and investors but also to the communities in which they are located.

Thank you again for the opportunity to comment on the proposed changes to the Community Reinvestment Act. If you have any questions, please do not hesitate to contact Garrett Martin (garrett@genesisfund.org) or me (beth@genesisfund.org) at the address above.

Sincerely,

Elizabeth McPherson
Executive Director