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WESTERN NEW YORK LAW CENTER, INC.
237 Main Street, Suite 1030
Buffalo, New York 14203
September 15, 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:
On behalf of the Western New York Community Reinvestment (WNYCRC), I
urge you to withdraw your proposed changes to the Community Reinvestment
Act (CRA) regulations. The WNYCRC is comprised of representatives from
over 20 organizations, individuals and municipalities who are committed
to increasing access to credit and homeownership for the underserved in
our area. Our communities have been hit hard by predatory lenders,
payday lenders, check-cashing institutions and other non-traditional
lenders. It is exactly our kinds of communities that CRA was enacted to
help –those that suffers from severe disinvestment.
To weaken CRA now, at a pivotal time when the very existence of our
community depends on the ability of prime lenders to compete with
unscrupulous lenders, would be a devastating blow to our Western New
York communities. We depend on the ability of prime lenders to respond
to community credit needs in a world where aggressive marketing tactics
by abusive lenders lead people to ruin and foreclosure.
We depend on regulators to ensure that the financial institutions are
capturing a market that exists in our community, particularly for those
who are “unbanked”or have previously had credit issues. We depend on
regulators to enforce access to quality credit for those who live in
communities that are not always sought after for banking and business
needs. We depend on regulators to ensure that banks do not only lend and
provide banking services in wealthy communities.
As you well know, 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.
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.
Furthermore, 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 remains for low- and
moderate-income rural residents are the crumbs of a shrinking CRA pie of
community development activity.
In sum, your proposal directly opposes 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.
Significantly, 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 committed to its continuing and affirmative
obligation to meet credit needs under the Community Reinvestment ACt,
you would propose additional community development and data reporting
requirements for more banks instead of proposing to diminish 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 important to our communities to be damaged by regulatory
abandonment 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,
Kathleen A. Lynch, Esq.
Coordinator of the
Western New York Community Reinvestment Coalition
cc:
National Community Reinvestment Coalition ( fax 202/ 628-9800)
President George W Bush (fax 202/ 456-2461)
Senator John Kerry (fax 202/ 224-8525)
Senator John Edwards (fax: 202/ 228-1374)
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