LENDERS FOR COMMUNITY DEVELOPMENT
From: Liz Givens [mailto:liz@L4CD.com]
Sent: Thursday, September 16, 2004 4:41 PM
To: Comments
Cc: 'Eric Weaver'; naahl@naahl.org; markp@communitycapital.org
Subject: Community Reinvestment -- RIN 3064-AC50
***VIA EMAIL***
September 16, 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:
Lenders for Community Development (LCD) 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 minority communities. The proposed
policies threaten to cut off the critical supply of capital that
low-income communities need to improve the economic opportunities of
their citizens.
LCD is a nationally recognized community development financial
institution based in San Jose, California. In partnership with banks,
philanthropic investors, and community-based agencies, LCD develops
financial products and services to channel resources into the poorest
Silicon Valley communities traditionally underserved by conventional
lenders. We help low-income individuals, families and communities create
economic opportunity, build financial stability, and pursue
self-sufficiency.
Since 1995, LCD has successfully directed over $39 million in
community investment into economically challenged neighborhoods and
improved the lives of 4,500 households.
Through its Small Business Micro-Loan Program, LCD has provided over
$4 million in financing to 175 entrepreneurs all over the Silicon Valley
area. Of these loans, 75% have gone to minority-owned businesses, 58% to
women-owned businesses, and 59% to businesses owned by low-income
people.
LCD has originated over $34 million in housing and facilities loans,
financing 2,845 units of affordable housing and 14 new community
facilities.
The communities and people that LCD serves have benefited greatly
from CRA. LCD was founded through a unique partnership of local banks,
both large and small, that came together to create a multi-bank
community development corporation. CRA was the impetus behind this
creative partnership in California and CRA has brought millions of
private dollars to the country's neediest communities to leverage public
funding.
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 the proposed changes, there would be no requirements for banks
with up to $1 billion in assets to engage in community development
lending and investments-activities that leverage limited public
subsidies to provide affordable housing and community and economic
development. Without this regulatory impetus, many institutions will
significantly reduce their activity in low income communities because,
in general, they view such activity as higher risk and/or less
profitable than more traditional investing.
The FDIC proposal would significantly harm community development
activities across the country and particularly in LCD’s California
market. If enacted, 122 of the banks in California, or 84 percent of the
State's institutions, would be eligible for the streamlined exam.
Meanwhile, 89 percent of California's rural financial institutions would
become eligible for the reduced community development requirement. The
FDIC's proposal would eliminate 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.
In sum, the FDIC's proposal is directly opposite CRA's statutory
mandate of imposing a continuing and affirmative obligation to meet
community needs. The proposed changes will dramatically reduce community
development lending, investing, and services. Eliminating critical data
on small business lending will also result in further reductions to the
amount and type of small business lending. The Federal Reserve Board and
the Office of the Comptroller of the Currency have recognized the harm
this proposal would cause.
CRA is a vital reinvestment tool. If the FDIC refuses to reverse this
proposed course of action, we will ask that Congress halt your efforts.
Sincerely,
Elizabeth Storey Givens
Director of Development and Policy
Lenders for Community Development
111 W. St. John Street, Suite 710
San Jose, CA 95113
Phone: 408.297.0204 x35
Fax: 408.297.4599
liz@l4cd.com
cc: Eric Weaver, Executive Director, Lenders for Community
Development; Judy Kennedy, President, National Association of Affordable
Housing Lenders; Mark Pinsky, President & CEO National Community Capital
Association
