Federal Deposit
Insurance Corporation

METROPOLITAN MILWAUKEE FAIR HOUSING COUNCIL

October 12, 2004

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

RE: RIN 3064-AC50

I am writing as the President and CEO of the Metropolitan Milwaukee Fair Housing Council (MMFHC), to urge you to withdraw the FDIC's proposed changes to the Community Reinvestment Act (CRA) regulations. Because MMFHC's leadership and members work to increase fair lending, ensuring that all communities receive equal and adequate access to credit, we can tell you, first hand, that CRA has been instrumental in increasing homeownership, boosting economic development, and expanding small businesses in Milwaukee's minority, immigrant, and low and moderate income communities.

We join with the National Community Reinvestment Coalition (NCRC) in expressing our alarm regarding the FDIC's proposal. We would like to see CRA requirements and monitoring strengthened, not weakened. Without the full range of loan, investment and service requirements, lenders are likely to slow down, if not halt, the progress they have made in community reinvestment. The proposed changes are contrary to the CRA statute and Congress' intent.

If the FDIC's proposal is implemented, an additional 27 Wisconsin institutions' CRA commitments would be reduced significantly. While this represents 12.5% of the FDIC-regulated institutions in the state, their $10.35 billion in assets represent 35.88% of the assets of Wisconsin's FDIC-regulated institutions. Just looking at the urban areas, an additional 22 urban-based Wisconsin institutions' CRA commitments would be reduced significantly. This represents 24.4% of the urban FDIC-regulated institutions in the state, and their $8.9 billion in assets represent 52.5% of the assets of Wisconsin's FDIC-regulated institutions.

The impact on FDIC-regulated institutions would be bad enough, but we are also concerned that if the FDIC implements this proposal, that the Federal Reserve and the Office of the Comptroller of the Currency (OCC) may be tempted to mirror the changes. So far, they have not embarked upon the path your agency proposes, because they recognized the harm it would cause. However, if the proposal is implemented and the rules change for FDIC-regulated institutions, the other regulators may follow suit, which would compound the disinvestment and harm to the communities we serve.

As an organization that works to expand housing choices for all segments of the community, we are troubled that the proposed changes would thwart the Administration's goals of improving the economic status of immigrants and creating 5.5 million new minority homeowners by the end of the decade. How can an administration hope to promote community revitalization and wealth building when it proposes to dramatically diminish banks' obligation to reinvest in their communities?

The proposed community development criterion would be seriously deficient as a replacement for the investment and service tests. We are concerned that 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. As you know, currently, mid-size banks must engage in all three activities. But
under the proposal, a mid-size bank could 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 would 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 too 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.

Another destructive element in the proposal is the elimination of the service test. CRA examiners would no longer expect mid-size banks to maintain and/or build bank branches in low and moderate income communities. Mid-size banks would no longer have an incentive to make sustained efforts to provide affordable banking services, and checking and savings accounts to consumers with modest incomes. Nor would mid-size banks be as inclined to respond to the needs for the growing demand for services needed by immigrants such as low cost remittances overseas.

While our organization works mostly on housing issues, housing does not exist in a vacuum. We recognize that healthy neighborhoods depend on healthy businesses. Therefore, we are troubled by the elimination of the requirement to report small business lending data. Lenders would no longer be required to report small business lending by census tract, or report the 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. The FDIC's proposal would decrease access to credit for small businesses, which is directly contrary to CRA's goals.

Lastly, to make matters worse, it is proposed that community development activities in rural areas could benefit any group of individuals instead of only low and moderate income individuals. Since banks will be able to focus on affluent residents of rural areas, the proposal threatens to divert community development activities away from the low and moderate income communities and consumers that CRA targets.

In summary, the FDIC's proposal is directly the opposite of CRA's statutory mandate of imposing a continuing and affirmative obligation to meet community needs. The proposal would dramatically reduce community development lending, investing, and services. The damage in both urban and rural areas would be compounded, harming those least able to afford reductions in credit and capital.

CRA is too vital to be gutted. If the FDIC does not reverse its proposed course of action, we will join with NCRC and others across the country, and ask that Congress halt these CRA-weakening efforts before the damage is done.

Sincerely
William R. Tisdale
President and CEO