PARIS LIVING
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a board member of the National Community Reinvestment Coalition,
Paris Living, a Community Development Corporaiton, I urge 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.
Paris Living is a relatively new community development corporation
and we are very dependent on our local banks for loans for our homes.
The banks have been very cooperative as they know their assistance helps
them meet the current CRA reguirements.
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,
Mary Clark, President
Paris Living, a Community Development Corporation
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