|
RED CLIFF HOUSING AUTHORITY
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:
The Red Cliff Housing Authority 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, including Indian country. The changes proposed for rural
communities will disproportionately affect tribes and Native Americans
living in tribal areas.
To this point, Native Americans living on reservations are the most
unbanked population in the United States. The Navajo Nation, for
example, has 5 bank branches in total for a population of 250,000 people
living in an area the size of West Virginia. You can see the same oar
greater number of branches in a single block in our Nation's capital.
The proposed changes would only serve to worsen banking services to
tribes. These changes, which would make smaller banks less accountable
for their community reinvestment activity, alarm us, as banks are
finally waking up to the investment opportunities in Indian country.
Indian country has made strides with the help of banks in the mortgage
arena and, we believe, that the strength of the current law has been
instrumental to this development. For example, we saw
conventional mortgage activity increase from 2001 through 2003. In
addition, the recent strides in economic development in Indian country
will be lost if banks aren't required to invest. The following data
point up the severe continuing needs in Indian country, that require a
strong CRA.
According to the GAO, the rate of homeownership for Native Americans
living on reservations is just 33 percent, or half that of the general
population and substantially lower than that of other minority groups.
In addition, Native Americans are four times more likely than the
average American family to live in substandard housing. (Fannie Mae
data, Testimony, Pattye Greene, May 3, 2004, House Financial Services
Committee) Overcrowding has been documented in the NA.lHC study "Too Few
Rooms..." (2001) reporting as many as 25 or even 30 people living in
deplorable conditions under one roof in a 2- or 3-bedroom house.
It is well known that smaller banks, those primarily regulated by the
FDIC, are more likely to serve rural populations, so these provisions
are disturbing to populations such as ours who are entirely rural With
the current Administration seeking to expand minority homeownership,
these measures will certainly not help and very likely halt the recent
gains in homeownership that we have seen taking place on tribal lands.
We believe the proposed changes will thwart the Administration's goal
of 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 $ I 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 Red Cliff Housing Authority has over fifty-three applications in
for housing. The Red Cliff Housing Authority also serves mainly
low-income Tribal members. The elimination of the service test will also
have harmful consequences for low- and moderate-income communities. C'RA
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. 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, and perhaps most devastating to Native Americans living in
tribal areas, 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 would 'earn CRA points even 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 opposite 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 is 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. We hope
that the FDIC, which earlier this year had the vision to hold a
conference on the "unbanked," will not now introduce changes detrimental
to the most "unbanked" population of all.
Sincerely,
Joseph Bresette
Red Cliff Housing Authority
Red Cliff Band of Lake Superior Chippewa
Cc: National Community Reinvestment Coalition (fax: 202-628-9800)
President George W. Bush (White House fax: 202-456-2461)
Senator John Kerry (fax: 202-224-8525)
Senator John Edwards (fax: 202-228-1374) |
