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COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION
17 September 2004
Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 E. 17th Street, NW
Washington, DC 20429
Dear Mr. Feldman:
RE: RIN 3064-AC50
Right at the top, were FDIC to implement its proposed regulations
Wyoming and Idaho would have NO banks with a CRA impetus to both invest
in and provide services to their communities. This is of acute
importance to the Idaho-Nevada CDFI in that both of these states fall
within our service area.
Because of the regulatory incentives provided by CRA, we've been able to
raise over $10,000,000 in capital for our loan fund from banks serving
the Idaho, Nevada and Wyoming area. This change in definition would have
a substantial and negative impact on our ability to raise loan fund
dollars.
As a member of the National Community Capital Association (NCCA) and on
behalf of the Idaho-Nevada CDFI, Inc., 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. 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.
Again, I urge you to remove this dangerous proposal from
consideration.
Sincerely,
Chuck Prince, VP and Director
Community Development Financial Institution, Inc.
Pocatello, ID 83204 |
