|
GELLER SILVIS & ASSOCIATES
August 24;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 member of the National Community Reinvestment Coalition,
our firm urges 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.
Many of the most significant changes in urban and rural neighborhoods
over the last 15 years are a result of the CRA related activities.
The proposed changes curtail future development in those very communities
that are beginning to show recovery in investment. It will also
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. How can an administration hope to promote
community revitalization and wealth building when it proposes to
dramatically diminish banks' obligation to reinvest in the communities
where they get their customers?
Don't
Go to the "Choose
a Test Approach"
The proposed asset threshold 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 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. Only 4 banks in Oregon will be
subject to the higher standards of CRA.
Critical On-Going Efforts Will Be Eliminated
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.
Don't Limit Data Disclosure
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.
Rural Rule Changes
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 a significant
number of rural residents are affluent, 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.
Conclusion
In sum, your proposal is directly the opposite of CRA's statutory
mandate of codifying 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,
Anna L. Geller
President
|
