Federal Deposit
Insurance Corporation

Center for Impact Research

From: Lise McKean [mailto:lmckean@impactr
Sent: Monday, October 18, 2004 3:55 PM
To: Comments
Subject: Community Reinvestment -- RIN 3064-AC50

I am writing on behalf of the Center for Impact Research to oppose the Federal Deposit Insurance Corporation (FDIC) proposed changes to the Community Reinvestment Act (CRA). If the FDIC adopts these changes, community development activity in low- and moderate-income neighborhoods and rural areas throughout the Chicago region and the nation will be threatened.

The FDIC’s decision is harmful for a number of reasons. First, the FDIC is the primary regulator of many state chartered banks that frequently fall between $250 million and $1 billion in assets. For institutions active in Illinois in 2003, nearly 40 percent of assets controlled by FDIC-regulated institutions were held by banks with assets between $250 million and $1 billion. Additionally, the proposed changes would dramatically affect the presence of FDIC-regulated institutions in Illinois’ LMI and rural communities.

An analysis of 2003 banking offices in Illinois urban areas indicates that increasing the asset size of small banks to $1 billion would decrease the number of FDIC-regulated banking offices in Illinois LMI census tracts operated by “large” banks by 63 percent. Deposits in LMI branches held by “large” FDIC-regulated banks would decline by 68 percent. FDIC-regulated branches controlling nearly $3.4 billion in LMI deposits, or over 10 percent of all LMI deposits state-wide, would shift from “large” to “small” institution status if the asset size of small banks were to increase to $1 billion. Rural areas will be hard hit as well. Just over 1 percent of rural Illinois banking offices operated by FDIC-regulated institutions would be held by “large” banks, a decline of 91.5 percent. This shift would represent nearly 8 percent of rural deposits state-wide.

The proposed changes would reduce the number of financial institutions considered “large” for CRA purposes. Our organization fears this will threaten access to investments, grants, and services for low- and moderate-income (LMI) communities served by large institutions that would shift to “small” status under the regulators’ proposal. There is a significant concern that areas predominantly served by mid-sized institutions will be particularly hard hit.

We oppose these changes to the Community Reinvestment Act and ask that FDIC drop this proposal.

Sincerely,
Dr. Lise McKean
Center for Impact Research
Chicago, IL