Federal Deposit
Insurance Corporation

From: Jim Roth [mailto:jroth@mccdmn.org]
Sent: Tuesday, October 19, 2004 4:46 PM
To: Comments
Subject: RIN number 3064-ACSO

Dear Mr. Feldman:

I am writing on behalf of the Minneapolis Consortium of Community Developers (MCCD) to express deep concern regarding FDIC’s proposed changes to Community Reinvestment Act (CRA) regulations. MCCD is an association of 27 nonprofit organizations engaged in community and economic development activities in Minneapolis and the Greater Metropolitan Area.

CRA has been instrumental in increasing homeownership, boosting economic development, and expanding small businesses in the nation’s minority, immigrant, and low- and moderate-income communities. The changes proposed by the FDIC considerably slow, if not reverse, the progress made in community reinvestment.

The proposed community development criterion would be seriously deficient as a replacement for the investment and service tests. Mid-size banks with assets between $250 million and $1 billion would be required to engage in only one of three activities: community development lending, investing or services. Currently, mid-size banks must engage in all three activities.

MCCD is concerned that the proposed criterion will result in significantly fewer loans and investments in affordable rental housing, Low-Income Housing Tax Credits, community service facilities, and economic development projects. Rather than engaging in a comprehensive effort to provide community development loans, investments and services, mid-sized banks may demonstrate compliance with the new criterion through distributing a few grants, or sponsoring events.

The elimination of the service test will also have harmful consequences for low- and moderate-income communities because CRA examiners will no longer expect mid-sized banks to maintain and/or build bank branches in these areas. Nationwide, banks with assets between $250 million and $1 billion that are eligible for the FDIC proposal have 7,860 branches. This proposal will leave banks with thousands of branches “off the hook” for placing any branches in low and moderate income communities.

Additionally, this proposal eliminates the business lending data reporting requirement for mid-sized banks. Banks that fall under the new criterion will no longer be required to report small business lending by census tracts or revenue size of the small business borrowers. Without data on lending to small businesses, it becomes more difficult to hold the mid-size banks accountable for responding to the credit needs of minority-owned, women-owned, and other small businesses.

Finally, the proposal eliminates the low and moderate income requirement for community development activities in rural areas. Because banks will be able to focus on affluent residents of rural areas, this proposal threatens to divert community development activities away from the low- and moderate-income communities and consumers that CRA targets.

Across the nation, this proposal would make 879 state-chartered banks with combined assets of over $392 billion eligible for the streamlined exam. In Minnesota, roughly half of the 32 banks with assets between $250 million and $1 billion are regulated by the FDIC and would fall under the new criterion. The total combined assets of these Minnesota banks that would be eligible for the streamlined exam is over $5 billion.

In sum, this proposal will harm affordable housing and community and economic development through reducing, by hundreds of billions of dollars, the bank assets available for these activities. In rural areas, the damage is compounded for areas least able to afford reductions in credit and capital.

CRA has been a powerful impetus for community development loans, investments and services benefiting underserved populations. With public resources dwindling, now is not he time to eliminate regulatory incentives for private capital to leverage scarce public dollars

Please rescind this proposal.

Sincerely,

Jim Roth
Executive Director
Minneapolis Consortium of Community Developers
3137 Chicago Ave. S.
Minneapolis, MN 55407
(612) 789-7337

MCCD Board
Deanna Foster, Chair (Hope Community)
Sherrie Pugh, Vice Chair (Northside Residents Redevelopment Council)
Alan Arthur (Central Community Housing Trust)
Steve Cramer (Project for Pride in Living)
Michael Krause (The Green Institute)
Ramon Leon (Latino Economic Development Center)
Brian Miller (Seward Redesign)
Tom Reynolds (Whittier Community Development Corporation)
Mike Temali (Neighborhood Development Center)

Members

African Development Center
Alliance Housing, Inc.
American Indian Neighborhood Development Corp.
American Indian Housing & Development Corp.
Artspace Projects, Inc.
Central Community Housing Trust
City of Lakes Community Land Trust
CommonBond Communities
Development Corporation for Children
The Green Institute
Hope Community, Inc.
Lyndale Neighborhood Development Corp.
Latino Economic Development Center
Metropolitan Economic Development Agency
Neighborhood Development Center
NorthEast CDC
N.S. Neighborhood Housing Services
Northside Residents Redevelopment Council
Phillips CDC
PRG
Project for Pride in Living
Riverton Community Housing Association, Inc.
Seward Redesign
T.C. Habitat for Humanity
Urban Ventures
West Bank CDC
Whittier CDC