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WOODSTOCK INSTITUTE
From: Geoff Smith [mailto:gsmith@woodstockinst.org]
Sent: Thursday, September 02, 2004 2:49 PM
To: Comments
Subject: CRA - Technical Amendments re: MSAs
September 2, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St., NW
Washington, D.C. 20429
To Whom It May Concern:
I am writing from the Woodstock Institute to comment on the proposal
to use updated Office of Management and Budget (OMB) definitions for
metropolitan statistical areas, which in some cases include a new
geographic unit for “metropolitan divisions,” to define CRA assessment
areas. Woodstock Institute is a Chicago-based research and policy
organization that has worked extensively on community reinvestment
regulation. We feel this proposal threatens to facilitate redlining in
CRA assessment areas.
According to the proposal, banking regulators would adopt new OMB
definitions of metropolitan statistical areas (MSAs) for CRA analysis
and bank assessment area designation. The most concerning aspect of the
OMB changes is the addition of a geographic unit for “metropolitan
division.” Twelve large MSAs that have some core region of at least 2.5
million people will now be subdivided into metropolitan divisions. These
metropolitan divisions are defined as groups of one or more contiguous
counties that contain an employment center or centers that are closely
connected through commuting ties. Together the metropolitan divisions
form the overall MSA. Bank regulators will use metropolitan divisions to
calculate median family income levels for CRA analysis, and financial
institutions will be allowed to designate one or more metropolitan
division, up to an entire MSA, as their assessment area.
While OMB’s goal in creating the metropolitan division may be “to
recognize that in large MSAs, demographic and economic conditions vary
wildly,” we fear that allowing banks to define their assessment areas
using metropolitan divisions may facilitate redlining and give financial
institutions stronger rationale for excluding portions of an MSA that
would previously have been included in an assessment area.
In the Detroit-Warren-Livonia MSA, for example, there are two
metropolitan divisions. One is Wayne County, where Detroit is located,
and the other is the suburban collar counties surrounding Wayne. Wayne
County has a median family income far lower than the surrounding
counties. While separating these two metropolitan divisions may have the
effect of more accurately targeting low- and moderate-income census
tracts in both, it also isolates Wayne County, and sets up a condition
where financial institutions can easily exclude it from their CRA
assessment areas. If it is too difficult for a financial institution to
lend or build branches in the lower-income Wayne County, it may choose
to shift resources to the more affluent suburban Detroit metropolitan
division and remove Wayne County from its assessment area altogether.
Such a scenario is very possible under the proposed rule.
Although other MSAs do not offer examples as dramatic as Detroit, we
feel this proposal sets up a condition where banks have increased
rationale and regulatory backing for excluding less desirable parts of
MSAs from their assessment areas and shifting business away from those
communities. While we support more accurate targeting of low- and
moderate-income communities, we do not support allowing financial
institutions to use metropolitan divisions to designate assessment
areas. We ask you to reconsider this proposal.
Sincerely,
Geoff Smith
Project Director
Geoff Smith
Project Director
Woodstock Institute
407 S. Dearborn, Suite 550
Chicago, IL 60605
Phone: 312-427-8070
Fax: 312-427-4007
www.woodstockinst.org |
