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CALIFORNIA REINVESTMENT COALITION
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
The California Reinvestment Coalition (CRC) 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 immigrant, low- and moderate-income, and people of color
communities.
The proposed changes will thwart the Administration's goals of
improving the economic status of immigrants and creating 5.5 million new
homeowners of color 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.
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 mid-size banks with
assets between $250 million and $1 billion to engage in only 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. In California, a large
number of these state-chartered banks are located in rural communities.
These communities rely on these banks as partners for increasing
lending, services and investments in their areas.
The FDIC's proposal that community development activities in rural
areas can benefit any group of individuals instead of only low- and
moderate-income individuals has the potential 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. The proposed streamlined exam will result in much
less community development activity in these communities.
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 remittance products.
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 small business
credit needs. Data disclosures are responsible for increasing access to
credit because it holds banks accountable. Your proposal will decrease
access to credit for small businesses, which is directly contrary to
CRA's goals.
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 a vital reinvestment tool. If you do not reverse your proposed
course of action, we will ask that Congress halt your efforts.
Sincerely
Rhea Serna
California Reinvestment Coalition
474 Valencia St, Suite 110
San Francisco, CA 94103
Cc: Senators John Kerry and John Edwards |
