Federal Deposit
Insurance Corporation

October 20, 2004

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

RE: RIN 3064-AC50

Dear Mr. Feldman:

I am writing to you on behalf of the Jesuit Conference board of the Society of Jesus in the United States regarding proposed changes to the Community Reinvestment Act (CRA) regulations. The Jesuit Conference represents the Society of Jesus in the United States, where there are approximately 3,300 U.S. Jesuit priests and brothers working in 28 Jesuit-affiliated universities and colleges, more than 60 high schools and middle schools, nearly 100 parishes, and numerous social programs throughout the country. Propelled by a mission of social justice and a commitment to empower individuals, families and communities most at-risk in our society, I write to strongly urge you to withdraw the proposed changes to the Community Reinvestment Act (CRA) regulations.

The bedrock of Catholic social teaching is respect for the human dignity of each person. From that flow responsibilities to promote just policies that foster the development of individuals, families and communities, among other things. The CRA has fostered the expansion of access to capital and credit for low- and moderate-income people, and has had a noticeable positive affect on their communities. This proposal, however, could result in massive disinvestment in low- and moderate-income communities, with far reaching ramifications that negatively affect children, families, minorities, immigrants, and indeed entire communities. Informed by our Catholic heritage and support for a preferential option for the poor, we strongly oppose this proposal.

Jesuits working throughout the country have witnessed the many positive fruits of CRA. It has been instrumental in increasing homeownership, boosting economic development, and expanding small businesses in the nation's low- and moderate-income communities. Your proposed changes are contrary to the CRA statute and Congress' intent because they will slow down – if not halt – the progress made in community reinvestment.

Under the current CRA regulations, banks with assets of at least $250 million are rated by performance evaluations that scrutinize their level of lending, investing, and services to low- and moderate-income communities. The proposed changes will eliminate the investment and service parts of the CRA exam for state-charted banks with assets between $250 million and $1 billion. In place of the investment and service parts of the CRA exam, the FDIC proposes to add a community development criterion. This community development criterion would require banks to offer community development loans, investments or services.

However, the 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 only have to engage in one of three activities: community development lending, investing or services. Currently, mid-size banks must engage in all three activities. Under your proposal, a mid-size bank can now choose a community development activity that is easiest for the bank instead of providing an array of comprehensive community development activities needed by low- and moderate-income communities.

The proposed community development criterion will result in significantly fewer loans and investments in affordable rental housing, Low-Income Housing Tax Credits, community service facilities such as health clinics, and economic development projects. It would be easy for a mid-size bank to demonstrate compliance with a community development criterion by spreading around a few grants or sponsoring a few homeownership fairs rather than engaging in a comprehensive effort to provide community development loans, investments, and services.

Your proposal would make 879 state-chartered banks with over $392 billion in assets eligible for the streamlined and cursory exam. In total, 95.7 percent or more than 5,000 of the state-charted banks your agency regulates have less than $1 billion in assets. These 5,000 banks have combined assets of more than $754 billion. The combined assets of these banks rival that of the largest banks in the United States, including Bank of America and JP Morgan Chase. Your proposal will drastically reduce, by hundreds of billions of dollars, the bank assets available for community development lending, investing, and services.

The elimination of the service test will also have harmful consequences for low- and moderate-income communities. CRA examiners will no longer expect mid-size banks to maintain and/or build bank branches in low- and moderate-income communities. Mid-size banks will no longer make sustained efforts to provide affordable banking services, and checking and savings accounts to consumers with modest incomes. Mid-size banks will also not respond to the needs for the growing demand for services needed by immigrants such as low cost remittances overseas.

Banks eligible for the FDIC proposal with assets between $250 million and $1 billion have 7,860 branches. All banks regulated by the FDIC with assets under $1 billion have 18,811 branches. Your proposal leaves banks with thousands of branches "off the hook" for placing any branches in low- and moderate-income communities.

Another destructive element in your proposal is the elimination of the small business lending data reporting requirement for mid-size banks. Mid-size banks with assets between $250 million and $1 billion 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 is impossible for the public at large to hold the mid-size banks accountable for responding to the credit needs of minority-owned, women-owned, and other small businesses. Data disclosure has been responsible for increasing access to credit precisely because disclosure holds banks accountable. Your proposal will decrease access to credit for small businesses, which is directly contrary to CRA's goals.

Finally, the proposal allows for any group of individuals to benefit from the community development activities in rural areas, instead of only low- and moderate-income individuals. Since banks will be able to focus on affluent residents of rural areas, your proposal threatens to divert community development activities away from the low- and moderate-income communities and consumers that CRA targets. Your proposal for rural America merely exacerbates the harm of your proposed streamlined exam for mid-size banks. Your streamlined exam will result in much less community development activity. In rural America, that reduced amount of community development activity can now earn CRA points if it benefits affluent consumers and communities. What's left over for low- and moderate-income rural residents are the crumbs of a shrinking CRA pie of community development activity.

Your proposal is in direct opposition to CRA's statutory mandate of imposing a continuing and affirmative obligation to meet community needs. This proposal will dramatically reduce community development lending, investing, and services. The damage of your proposal is compounded in rural areas, which are least able to afford reductions in credit and capital. You also eliminate critical data on small business lending. Two other regulatory agencies, the Federal Reserve Board and the Office of the Comptroller of the Currency, did not embark upon the path you are taking because they recognized the harm it would cause.

We support the CRA's continuing and affirmative obligation to meet credit needs and encourage you to propose additional community development and data reporting requirements for more banks, rather than reduce existing obligations as your proposal calls for. A mandate of affirmative and continuing obligations implies expanding and enlarging community reinvestment, not significantly reducing the level of community reinvestment.

Informed by Catholic social teaching and a commitment to social justice, we strongly oppose this proposal. CRA affects too many lives and is far too vital to be fundamentally altered in such a negative way by your proposal.

Sincerely,

Ms. British Robinson
National Director for Social and International Ministries
US Jesuit Conference

cc: President George W. Bush
Senator John Kerry
National Community Reinvestment Coalition