Davenport Civil Rights Commission
September 17, 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:
As a director
of an agency that partners with HUD to increase the opportunity
for home ownership
for minorities and low and moderate
income persons, I urge you to withdraw your proposed changes to the
Community Reinvestment Act (CRA) regulations. 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.
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-chartered 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 and
services.
The community development criterion would be seriously deficient
as a replacement for the investment and services 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 could
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.
Here in the state
of Iowa, 296 of the 297 banks regulated by the FDIC would be exempt
from
the stricter “three-part test”.
The effect of removing that many banks from the need to engage in
all three levels of lending and services will be devastating to Iowa’s
rural areas as well as its larger urban communities.
The consequences for low- and moderate-income communities is that
CRA examiners will no longer expect mid-size banks to maintain and/or
build bank branches in their communities. Mid-sized banks will no
longer make sustained efforts to provide affordable banking services,
and checking and savings accounts to consumers with modest income.
Mid-size banks will also not respond to the needs for the growing
demand for services needed by immigrants which is a growing population
in Iowa.
In summary, your
proposal conflicts with 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.
CRA is too vital to the production and maintenance of affordable
housing to be gutted by regulatory fiat and neglect. Your proposed
changes to the Community Reinvestment Act regulations flies in the
face of the U.S. Department of Housing and Urban Development goal
to increase home ownership for our most disadvantaged citizens. Please
reverse your proposed course of action, or we will ask Congress to
halt your efforts before the damage is done.
Sincerely,
Judith J. Morrell
Executive Director
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