Wisconsin
Partnership for Housing Development
From: Bill Perkins [mailto:billperkins@wphd.org]
Sent: Monday, September 20, 2004 4:45 PM
To: Comments
Subject: Comments on Proposed Changes to CRA Regulations
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St NW
Washington DC 20429
Dear Mr. Feldman:
The Wisconsin Partnership for Housing Development, Inc. respectfully
requests that you reconsider the FDIC's proposed changes to the Community
Reinvestment Act (CRA) regulations. As I'm sure you agree, CRA has
been extremely important as an incentive for sound investments in
expanding affordable housing options and home ownership. It has also
helped to stimulate investments in job creation and entrepreneurship
in low and moderate income and minority communities. We believe that
the proposed changes to the CRA regulations changes are also inconsistent
with the Administration's stated goals of improving the economic
status of immigrants and creating 5.5 million new minority home owners
by 2010.
"
Small" banks are extremely important to housing and economic
development in Wisconsin. We are a state distinguished by a vital
role for smaller, independent lending institutions. In 1990, I
was appointed by President George H.W. Bush as the first "community
interest director" on the Federal Housing Finance Board. I
served in that capacity through 1993, and oversaw the implementation
of the Affordable Housing Program and other community reinvestment
initiatives within the Federal Home Loan Bank System. That experience
reinforced my awareness of the critical importance of CRA in encouraging
lenders to fully consider ways in which they can contribute to
community development. In my role on the Finance Board, I was an
outspoken advocate for ensuring the financial health and competitiveness
of smaller community-based thrifts and banks, because I believe
they play a unique role in the nation's credit framework. Because
of their unique role, I also believe we need to maintain a strong
role for those institutions in community reinvestment.
I offer some more specific comments:
• Under 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 to the regulations would eliminate
the investment and service tests for banks and thrifts with assets
between $250 and $1 billion. The proposal would make 879 state-chartered
banks with over $392 billion in assets eligible for a more cursory
CRA examination. More than 5,000 state-chartered banks regulated
by the FDIC have less than $1 billion in assets. These banks represent
almost 96% of all FDIC-regulated state-chartered lending institutions.
Banks with assets between $250 million and $1 billion have 7,860
branches in communities across the country.
• In my own organization's work as a developer of affordable housing
and as a provider of HUD-funded technical assistance to other nonprofit
developers, we have made extensive use of Low Income Housing Tax
Credits. LIHTCs are a valuable tool, but their complexity can be
daunting to smaller banks and thrifts in their roles as both lenders
and investors. The investment test is an important incentive to
smaller banks and thrifts who, in turn, are particularly important
sources of capital in smaller communities and rural areas. Services
such as branches, checking accounts, Individual Development Accounts
(IDAs) and debit card services, which are addressed by the service
test, are also of crucial importance to communities where small
banks and thrifts have a vital role.
• We do not believe that the proposed community development criterion
will adequately replace the investment test. Currently, lending
institutions between $250 million and $1 billion in assets must
meet all three of the CRA's tests -- lending, investment and services.
Allowing lenders to choose one of the three tests based on the
lender's needs rather than the community's needs will not serve
the community development needs of low and moderate-income communities.
It also will not encourage lenders to use their creativity to find
the best ways to meet those needs, which we believe is a fundamental
purpose of the CRA.
• We do not believe that the elimination of small business lending
data reporting requirements for banks between $250 million and
$1 billion in assets furthers the purposes of the CRA.
• We also strenuously object to the proposed provision that community
development activities in rural areas be considered as meeting
the requirements of the CRA irrespective of the income levels of
the beneficiaries of the activities. That would be comparable to
allowing any activities in a central city to be considered as meeting
the requirements of the act simply because the city as a whole
includes low and moderate-income neighborhoods.
I urge the FDIC to stand firm behind the purposes of the Community
Reinvestment Act. "Small" banks play a vital role in
the nation's communities, and we need them to continue to play
a vital role in community development. The effectiveness of the
CRA in meeting that objective is unquestionable, and it deserves
to be protected by the FDIC and other lending regulators.
Thank you for your consideration of these comments and suggestions.
William C. Perkins
Executive Director, The Wisconsin Partnership for Housing Development,
Inc.
121 S. Pinckney Street, Suite 200, Madison, WI 53703
Phone: 608-258-5560, Ext. 23 Fax: 608-258-5565
E-mail: billperkins@wphd.org
Bill Perkins
Executive Director
The Wisconsin Partnership for Housing Development, Inc.
121 S. Pinckney Street, Suite 200
Madison WI
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