The HopeLine
From:
Marlene Cintron
Sent: Monday, August 30, 2004 9:15 AM
To: Comments
Subject: CRA
Date:August 30, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St., NW
Washington, DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a (member
or supporter) of the National Community Reinvestment Coalition,
(name of organization)
urges you to withdraw your proposed
changes to the Community Reinvestment Act (CRA) regulations. 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. 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.
The proposed
changes will 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. Since FDIC Chairman
Powell, a Bush Administration appointee, is proposing the changes,
the sincerity of the Administration’s commitment to expanding
homeownership and economic development is called into question. 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?
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. The community development criterion would
require banks to offer community development loans, investments or
services.
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 will 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.
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.
(Add some data here for your state or locality. Contact NCRC for
help in getting the data)
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.
Lastly, to make
matters worse, you propose that community development activities
in rural
areas can 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, 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.
In sum, your
proposal is directly the opposite of CRA’s statutory
mandate of imposing a continuing and affirmative obligation to meet
community needs. Your proposal will dramatically reduce community
development lending, investing, and services. You compound the damage
of your proposal 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.
If your agency
was serious about CRA’s continuing and affirmative
obligation to meet credit needs, you would be proposing additional
community development and data reporting requirements for more banks
instead of reducing existing obligations. A mandate of affirmative
and continuing obligations implies expanding and enlarging community
reinvestment, not significantly reducing the level of community reinvestment.
CRA is too vital to be gutted by regulatory fiat and neglect. If
you do not reverse your proposed course of action, we will ask that
Congress halt your efforts before the damage is done.
Sincerely,
YMarlene Cintron
The HopeLine
Bronx, NewYork
|
