From: Kathy Stearns [mailto:kathys@communitycapital.org]
Sent: Wednesday, September 29, 2004 12:16 PM
To: Comments
Subject: SPAM::Withdraw Proposal to Weaken CRA
Kathy Stearns
520 Arbutus Street
Philadelphia, PA 19119
September 29, 2004
Robert E. Feldman
FDIC, ATTN: Comments/Legal ESS
550 E. 17th Street, NW
Washington, DC 20429
Dear Robert Feldman:
Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 E. 17th Street, NW
Washington, DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a staff person of the National Community Capital Association
(NCCA), I
urge you to withdraw your proposed changes to the Community Reinvestment
Act (CRA) regulations. If enacted, the FDIC will define small banks
as $1
billion and less with those banks having assets between $250 million
and
$1 billion subject to community development criteria.
Under current regulations, banks with assets of at least $250 million
have
performance evaluations that review lending, investing, and services
to
low- and moderate-income communities. You propose that state-chartered
banks with assets between $250 million and $1 billion follow a community
development criterion that allows banks to offer community development
loans, investments OR services will result in significantly fewer
loans
and investments in low-income communities¯the very communities
that the
CRA was enacted to serve. Currently, mid-size banks must show activity
in
all three areas of assessment. Under the proposed regulations, the
banks
will now be able to pick the services convenient for them, regardless
of
community needs.
The proposed regulation is in direct opposition to Congressional
intent of
the law. In a letter signed by 30 U.S. Senators to the four regulatory
agencies regarding an earlier proposal (February 2004) to increase
the
definition of “small bank” from $250 million to $500
million, the Senators
wrote, “This proposal dramatically weakens the effectiveness
of CRA…We are
concerned that the proposed regulation would eliminate the responsibility
of many banks to invest in the communities they serve through programs
such as the Low Income Housing Tax Credit or provide critically needed
services such as low-cost bank accounts for low- and moderate-income
consumers.”
This proposal would remove 879 state-chartered banks with over $392
billion in assets from scrutiny. This will have harmful consequences
for
low- and moderate-income communities. Without this examination, mid-size
banks will no longer have to make efforts to provide affordable banking
services or respond to the needs of these emerging domestic markets.
In addition, your proposal eliminates small business lending data
reporting for mid-size banks. Without data on lending to small businesses,
the public cannot hold mid-size banks accountable for responding
to the
credit needs of small businesses. Since 95.7 percent of the banks
you
regulate have less than $1 billion in assets, there will be no
accountability for the vast majority of state-chartered banks.
Your proposal is especially harmful in rural communities. The proposal
seeks to have community development activities in rural areas counted
for
any group of individuals regardless of income. This could divert
services
from low- and moderate-income communities in rural areas where the
needs
are particularly great. Wyoming and Idaho would have NO banks with
a CRA
impetus to both invest in and provide services to their communities.
Vermont, Alaska, and Montana would only have one bank each. Commenters
advocating for this change state that raising the limit to $1 billion
would have only a small effect on the amount of total industry assets
covered under the large bank tests. I think this would be very hard
to
justify to the low-income communities in Idaho left without meaningful
services.
Instead of weakening the CRA, the FDIC should be doing more to protect
our
communities. CRA covers only banks and does not differentiate between
stand-alone banks and banks that are part of large holding companies.
All
financial services companies that receive direct or indirect taxpayer
support or subsidy should have to comply with the CRA. Small banks
that
are part of large holding companies should have to conform to the
CRA’s
standards that are more stringent.
CRA exams look
at a bank’s
performance in geographical areas where a bank
has branches and deposit-taking ATMs. In 1977, taking deposits was
a
bank’s primary function. In 2004, banks no longer just accept
deposits:
they market investments, sell insurance, issue securities and are
rapidly
expanding into more profitable lines of business like electronic
banking.
Defining CRA assessment areas based on deposits no longer makes sense.
Customer base should be the focus for CRA assessment. For instance,
if a
Philadelphia bank has credit card customers in Oregon, it should
have CRA
obligations there.
The regulators also must protect consumers from abusive lending.
The
FDIC’s proposal completely ignores this issue. Predatory lending
strips
billions in wealth from low-income consumers and communities in the
U.S.
each year. Borrowers lose an estimated $9.1 billion annually due
to
predatory mortgages; $3.4 billion from payday loans; and $3.5 billion
in
other lending abuses, such as overdraft loans, excessive credit card
debt,
and tax refund loans. Without a comprehensive standard, the CRA becomes
nearly meaningless. The regulation should contain a comprehensive,
enforceable provision to consider abusive practices, and assess CRA
compliance accordingly, and it must apply to ALL loans.
The impetus for the creation of the CRA was to encourage federally
insured
financial institutions to meet the credit and banking needs of the
communities they serve, especially low- and moderate-income communities.
This proposal undermines the intent of CRA, and threatens to undo
the
years of effort to bring unbanked consumers into the financial mainstream.
I urge you to remove this dangerous proposal from consideration.
Sincerely,
Kathy Stearns
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