| BORDER FAIR HOUSING &
ECONOMIC JUSTICE CENTER Mr. Robert E. Feldman,
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429
Washington, DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a member of the National Community Reinvestment Coalition, the
Border Fair Housing and Economic Justice Center (BFHC) urges you to
withdraw your proposed changes to the Community Reinvestment Act (CRA)_
regulations. The Border Fair Housing and Economic Justice Center (BFHC)
is a private, not-for-profit civil rights organization dedicated to
affirmatively furthering fair housing, equal access to credit, economic
justice, the development of decent and affordable housing, community
development and expanding small business opportunities in the Colonias
and communities in the Southwestern United States, with 150 miles from
the U.S.-Mexico Border. 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.
The state of Texas would suffer greatly to the proposed changes.
Particularly hard-hit would be the state's urban areas since 74 percent
of the total assets in the state are controlled by institutions in urban
areas. Ninety-five percent of the institutions in urban areas have less
than $1 billion in assets, while sixteen percent have between $2 it
million and $1 billion in assets, and would be affected by the proposed
regulation change. Moreover, forty-four percent of assets in urban Texas
are controlled by institutions with less than $1 billion and would
therefore be subject to abbreviated CRA exams.
Rural areas would also feel the effects of the proposed regulation
change, as 26 percent of the state's total assets are controlled by
institutions in rural areas, where 99 percent of the institutions in
rural areas have less than $1 billion in assets and 6 percent have
between $250 million and $1 billion and would be affected by the
proposed regulation change. Moreover, if the FDIC's proposal is adopted,
86 percent of the assets in rural Texas would not be subject to the
current level of scrutiny under CRA.
While the FDIC only oversees one institution in El Paso, Texas and it
has less than $250 million in assets, thereby not making it subject to
the FDIC's proposal, the FDIC oversees 313 institutions in the state,
controlling $67 billion in assets. Since our state economy is closely
interrelated, the hardships instituted by the proposed changes would
surely trickle down to El Paso.
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,
Anibal Olague
Executive Director
Border Fair Housing & Economic Justice Center
2017 Texas Ave., El Paso, TX 79903
Cc: National Community Reinvestment Coalition
President George W. Bush
Senators John Kerry and John Edwards |
