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ILLINOIS FACILITIES FUND
October 5, 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:
The Illinois Facilities Fund (IFF) urges you to support the current
structure of the Community
Reinvestment Act by withdrawing your proposal to raise the “small bank”
definition from $250
million to $1 billion in assets and the other proposed changes to CRA.
Any changes to CRA and
especially the definition of a “small bank” will:
! Adversely impact the Community Development Financial Institutions (CDFI)
industry and
other vital community development investments in low-income and
underserved areas
that have been essential to providing communities and individuals with
access to capital;
! Result in Illinois only having 13 of 467 FDIC regulated banks subject
to the full CRA
examination; and
! Negatively affect community and economic development investments in
rural
communities.
Importance of CRA to IFF and CDFIs
CRA has promoted investments by financial institutions in the IFF and
served as an
essential solution to the problem of the denial of access to capital in
minority and low-income
communities. As a federally certified community development financial
institution (CDFI), the
IFF offers lending, facilities planning and development, research and
related education and
advocacy to Illinois nonprofits serving low-income and special needs
populations. Since the
inception of the IFF, 12 Illinois banks have provided the IFF with over
$31 million at below
market rates. This financing is essential to the IFF’s track record of
providing more than $75
million in real estate financing to over 200 Illinois nonprofits,
resulting in the creation of 7,500
jobs and development of 3.7 million square footage of new real estate in
traditionally financially
underserved markets. IFF clients include child care centers, food
pantries, supportive housing
for families and individuals with developmental disabilities, health
clinics in rural areas and faithbased
organizations in high-need and low-income communities.
In addition to the IFF, CDFIs in communities throughout the country, such
as community
development credit unions, revolving loan funds, and venture capital
funds, have benefited from
similar bank investments. And because of CRA have the resources to
specialize in providing
financial services and access to capital to individuals, small
businesses, faith-based or nonprofit
community-based organizations in low-income or economically
under-invested markets. In 2002
alone, a sample of 442 CDFIs from across the country provided over $6.2
billion in financing,
developed 34,000 units of affordable housing, closed 4,100 mortgages and
created or
maintained more than 34,000 jobs.
Impact on Illinois
If FDIC chooses to raise the small bank standard from $250 million to $1
billion, only 13
of 467 FDIC regulated banks would be subject to the full CRA Exam,
including the investment
and services tests. This would eliminate the most important incentive
for financial institutions to
partner with CDFIs and others engaged in community development. Without
this incentive, it
will be increasingly difficult for community development finance
organizations to obtain the
resources and investments to fund essential development projects,
especially at a time when
the national poverty rate is increasing. IFF’s strategic plans, based on
a careful market demand
analysis showed that there were nonprofits throughout Illinois in need
of access to capital, call
for significant growth statewide, aiming for $100 million in capital to
invest in the next five years.
A change to the CRA regulations would pose serious hurdles to attaining
that growth.
In Illinois, there are 467 banks regulated by the FDIC with combined
assets of over
$83.4 billion. 97.2% of these banks have assets under $1 billion. With
this change, an
additional $31.1 billion in banks assets would only be subject to a
streamlined CRA Exam. This
combined with the $33.1 billion in assets already subject to a
streamlined CRA Exam, results in
over $66.6 billion—or 79.8%--in assets of FDIC regulated Illinois banks
not subject to the full
CRA regulations.
Implement New Community Development Criterion for Existing Small Banks
It would be beneficial for FDIC to implement the new community
development criterion
for small banks with assets under $250 million that currently are
subject to only the streamlined
exam instead of impacting banks with assets over $250 million that are
currently subject to the
full CRA examination. Under FDIC’s proposal, banks with assets between
$250 million and $1
billion choose the community development activities to engage in instead
of providing an array
of comprehensive community development activities needed by low-and
moderate-income
communities. As an alternative and to ensure community development is
part of the CRA
evaluation process, it would be beneficial if FDIC chose to subject
banks with assets under
$250 million to this new community development criterion. Since these
banks currently are only
subject to a streamlined “small bank” CRA examination, this would
provide these banks with the
opportunity to be rated on their community development work when
currently no opportunity exists. By changing your proposal to impact current “small banks”
there will be more bank
involvement in community development instead of the significantly less
that will result from your
current proposal.
Impact on Rural Communities
Many small municipalities and rural areas in Illinois will be negatively
impacted by the
proposed changes with less community investments targeted to low and
moderate-income
areas, especially under the new proposed definition of rural. It is
essential to support community
development and respond to the unique challenges confronting rural
communities, but this
response should ensure that resources are targeted to those with the
greatest need. Changing
the definition of community development to encompass all rural areas
instead of just low and
moderate income areas will result in less resources in areas with the
greatest need. Compound
this with the fact that the proposed changes in the definition of a
small bank will result in only 7
of Illinois’ 102 counties being home to FDIC regulated banks subject to
the full CRA
Examination. Through IFF lending and investments in many rural areas and
small communities
throughout Illinois, the IFF knows that there is a great need for
investments and capital
especially for affordable housing, community facilities and
transportation, however, changing
the definition of community development to encompass all rural areas and
having less banks
subject to the full CRA examination will negatively impact low and
moderate rural communities
with the greatest needs.
Conclusion
CRA has been vital not only for the IFF, but to the growth and
sustainability to the
Community Development Finance industry and its ability to provide
financial services and
products to traditionally underserved communities throughout the county.
The proposed
changes for FDIC regulated banks with assets over $250 million should be
withdrawn in order
to ensure the continued growth of this important industry.
Sincerely yours,
Elizabeth A. Evans
Director of Government & Community
Affairs
Illinois Facilities Fund Illinois Facilities Fund
Chicago
300 West Adams Street
Suite 431
Chicago, Illinois 60606
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