Federal Deposit
Insurance Corporation

From: Coopey, Jerry (HRSA) [mailto:JCoopey@hrsa.gov]
Sent: Wednesday, October 20, 2004 2:24 PM
To: Comments
Subject: NTR;3064-AC50

Given what we found in our 2004 CAH survey I would have to agree with the comments you've received so far. The proposed changes (i.e., increasing the number of rural banks that can opt out of the CRA requirements) will likely further tighten the ability of needy rural hospitals and clinics to get the capital they need to meet local needs. We have already witnessed a dramatic tightening in private capital markets. Several of the comments you received also speak to the problems stemming from growing bank mergers. Our research on CAHs suggest that local lending institutions have represented a significant source of needed capital for small rural hospitals. Out of the 175 primary and 51 secondary CAH loan projects identified in our 2004 survey, 53 percent were underwritten by local lending institutions. These loans accounted for approximately 40 percent of all loan dollars obtained by those CAHs over the two years preceding our survey.

We can be sure that the motivation for changing the definition of small bank stems from a considered and informed decision-making process. Unfortunately, as is often the case, there appears to be a bad spin-off for rural interests. It would be nice if someone had the capacity to model this policy to estimate the relative impact for stabilizing and maintaining health rural economies. It would also help to collect information on how classification of local lending institutions as "small banks" has made it difficult for rural needs to be met. This would mean a comparison between those institutions that are required to demonstrate their efforts with rural communities versus those that have the option to forego working with local agencies and providers. It would probably be a good idea to model these impacts according to both the current standard of banks with less than $250,000,000 in assets and those with less than $1 billion in assets.

I am not sure how well the cause is served through anecdotal evidence. The changes were likely proposed for hard economic reasons and to cause the decision-makers to reconsider you will need to make a stronger economic argument not to follow through.

One of the things that I see standing in the way of doing this is what seems to be a fundamental misunderstanding of how the mechanics of the proposed changes will work. For example, some of the information already received in response to your note appears to confuse more than clarify (e.g., examples of situations were local lending institutions already exempt from CRA requirements because they are have assets under $250 million have proven to be helpful in meeting rural community capital needs. It would seem that this type of option is always available to those that are exempt and will continue after the pool of excused banks increases. What needs to be done is demonstrating how needs could not be met without the CRA requirement in place.

Walt Gregg
University of Minnesota
Rural Health Research Center
(612) 627-4411
(612) 627-4415 Fax