BOIS FORTE
RESERVATION HOUSING DIVISION
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:
Bois Forte Band of Chippewa 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, including Indian country. The changes proposed for
rural communities will disproportionately affect tribes and Native
Americans living in tribal areas.
To this point, Native Americans living on reservations are the most
unbanked population in the United States. The Navajo Nation, for
example, has 5 bank branches in total for a population of 250,000
people living in an area the size of West Virginia. You can see the
same or greater number of branches in a single block in our Nation's
capital.
The proposed
changes would only serve to worsen banking services to tribes.
These changes, which would make smaller banks less accountable
for their community reinvestment activity, alarm us, as banks are
finally waking up to the investment opportunities in Indian country.
Indian country has made strides with the help of banks in the mortgage
arena and, we believe, that the strength of the current law has been
instrumental to this development. For example, we saw conventional
mortgage activity increase from 2001 through 2003. In addition, the
recent strides in economic development in Indian country will be
lost if banks aren't required to invest. The following data point
up the severe continuing needs in Indian country, that require a
strong CRA.
According to
the GAO, the rate of homeownership for Native Americans living
on reservations
is just 33 percent, or half that of the general
population and substantially lower than that of other minority groups.
In addition, Native Americans are four times more likely than the
average American family to live in substandard housing. (Fannie Mae
data, Testimony, Pattye Greene, May 3, 2004, House Financial Services
Committee) Overcrowding has been documented in the NAIHC study "Too
Few Rooms..." (2001) reporting as many as 25 or even 30 people
living in deplorable conditions under one roof in a 2- or 3-bedroom
house.
It is well known that smaller banks, those primarily regulated by
the FDIC, are more likely to serve rural populations, so these provisions
are disturbing to populations such as ours who are entirely rural.
With the current Administration seeking to expand minority homeownership,
these measures will certainly not help and very likely halt the recent
gains in homeownership that we have seen taking place on tribal lands.
We believe the proposed changes will thwart the Administration's
goal of creating 5.5 million new minority homeowners 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. How can an administration hope to promote community revitalization
and wealth building when it proposes to dramatically diminish banks'
obligation to reinvest in their communities?
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 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 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. 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.
We currently
have 46 families on the waiting list for housing and do not expect
a decline in
applications for the next 5 years. 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. 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 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.
Lastly, and perhaps most devastating to Native Americans living
in tribal areas, you propose that community development activities
in rural areas can benefit any group of individuals instead of only
low- and moderate-income individuals. Since banks will be able to
focus on affluent residents of rural areas, 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 would earn CRA points
even 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.
In sum, your proposal is directly opposite 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 is 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. We hope that the FDIC,
which
earlier this year had the vision to hold
a conference on the "unbanked," will not now introduce
changes detrimental to the most "unbanked" population of
all.
Sincerely,
Burny Tibbetts, Housing Director
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