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September 14, 2004
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:
I am a concerned citizen opposed to watering down CRA (Community
Reinvestment Act) requirements for mid-sized banks. CRA is vital for
increasing homeownership and economic development in lower-income
communities. However, your proposed changes will halt the progress that
has been made and indeed could devastate the New Hampshire Community
Loan Fund which in turn would have a crippling impact on housing and
community development.
I understand that banks with over $250 million in assets must be
tested on their number of loans, investments, and services to low- and
moderate-income communities. But your proposal would eliminate the
investment and service requirements for all banks with under $1 billion
in assets. This will result in significantly fewer loans and investments
in affordable rental housing, health clinics, community centers, and
economic development projects.
In the watered-down exam, you would allow mid-sized banks to choose
which community development activities they will undertake. Right now,
these banks must make community development loans, investments, and
services. Your proposed test allows banks to choose only one of the
three activities. The result will be less community development
activity. I have already had one bank tell a community group working on
an investment from the bank be told that they want to wait – they want
to see if they have to do it. I think you underestimate how important
these regulations are in getting banks to do what they will piously tell
you is good to do.
You also propose that community development activities in rural areas
should benefit any group of individuals instead of only low- and
moderate-income individuals. But this will allow banks to cherry-pick
and focus on affluent residents of rural areas rather than the lower
income consumers CRA targets. We already have trouble enough with
cherry-picking. A few years ago I documented that one rural bank was
collecting deposits in a very poor town (where its headquarters was) but
doing the bulk of its lending in a wealthy community nearby that at the
time they didn’t even have a branch in. They were taken to task for this
in their next CRA exam and subsequently forced to develop a lending plan
for their home town. These tools are critical in rural areas. PLEASE do
not take these tools away from us.
Finally, you would also eliminate publicly available data on the
small business lending of mid-sized banks. Without data, community
groups and citizens cannot hold banks accountable for lending to small
businesses in their neighborhoods. We have used this data repeatedly to
document lending “holes” (such as loans between $25,000 and $100,000)
and to then get banks to develop plans for addressing those credit
needs.
Your changes directly oppose CRA’s mandate to require lenders to meet
community needs. CRA is too important to be gutted. Please drop your
proposal like the two other federal agencies that recognized its harm to
underserved communities.
Banking consolidation as well as growth has created midsize banks out
of what were once community banks. Some have not grown into the
obligations that go with being larger and need regulations to force them
to learn how to behave according to their size. These banks still rest
on the myth that community banks are by definition good banks that meet
the needs of their communities. I would suggest that maybe a quarter of
them take that adage seriously and work diligently with the community as
they grow. The rest have to be taught how to make new kinds of
investments, taught to deal with larger loans and to address new
communities. Some do that more gracefully than others. And some complain
mightily about having to now comply with regulations that other big
banks have been complying with for years, wanting to be bigger without
having to play by all the rules of being bigger. CRA is essential to
making sure that they learn these lessons. PLEASE DO NOT MAKE THE
PROPOSED CHANGES.
Sincerely,
Martha Yager
Cc:
National Community Reinvestment Coalition
President George W. Bush
Senators John Kerry and John Edwards
Senator John Sununu
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