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FDIC Federal Register Citations

GREENLINING INSTITUTE

September 3, 2004

Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street
N.W., Washington, DC 20429.
VIA FACSIMILE AND U.S. MAIL

RE: RIN 3064-AC50

Opposition to One Billion Dollar Secrecy Proposal: Millions in Presidential Contributions from Banks Expected

Dear Secretary Feldman,

The Greenlining Institute represents 39 minority business, consumer, immigrant service, church and community groups, including the Latin Business Association, The California Black Chamber of Commerce, the National Council of Asian American Business Associations, First AME Church, the Southeast Asian Community Center and Hermandad Mexicana Latinoamericana.

We strongly support Chairman Greenspan’s position that the CRA scrutiny exemption for small banks should remain at $250 million and we strongly oppose the FDIC’s unilateral decision to raise the exemption level to one billion dollars.

In California, where the FDIC regulates 153 institutions, the FDIC proposal will allow 131 banks to be exempt (85 percent exempt). Moreover, the number of exempted branches will more than double (220 to 504 exempted branches) and the amount of exempted assets will increase by $9.5 billion.

The proposed changes are in direct conflict with the Bush Administration’s stated goals of improving the economic status of immigrants and creating 5.5 million new minority homeowners by the end of the decade. It is implausible for California’s neediest communities to move anywhere near these goals when the administration turns a blind eye to a financial institution’s responsibilities to community reinvestment. At a time of increased corporate transparency and scrutiny, the FDIC decision to exempt the vast majority of its banks in California is not only bad policy but also sends the wrong regulatory and political signals.

Ineffective Community Development Criterion

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 the 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. Weak

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.

Small Business Lending

Another destructive element in the 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. This proposal would further compound the problem of colorblindness under Reg B and become another obstacle to community groups and regulators from holding mid-size banks accountable to the credit needs of minority and women-owned small businesses. Data disclosure has been responsible for increasing access to credit precisely because disclosure holds banks accountable. This proposal will decrease access to credit for small businesses, which is directly contrary to CRA’s goals.

President Bush Campaign Funds

Since the FDIC decision will substantially benefit all banks under the one billion dollar threshold, including those under $250 million who hope to become larger or to be acquired, it is highly likely that this decision could have major political implications. We therefore urge that the FDIC and/or independent watchdog campaign finance organizations compile and publish a list of political contributions by all banks, their officers and management to the presidential campaign as of January 1, 2004 to the present. The FDIC can collaborate with organizations such as Campaign Finance Institute, the Center for Responsive Politics and the Center for Public Integrity for assistance on this research.

Greater Scrutiny of Very Large Banks

Many community and small business groups would be less critical of the FDIC’s proposal if it had been accompanied by a pledge to use its resources to:

a) more effectively scrutinize very large banks ($5 billion or more in assets); and
b) ensure that banks with below average lending records receive a “Needs

to Improve” CRA rating rather than the “Satisfactory” or “Outstanding” CRA ratings that are virtually guaranteed, even with a well below average record. (Over 99 percent of very large banks receive a “Satisfactory” or “Outstanding” rating.)

If regulators wish to expand the threshold for scrutiny, they should first secure a legislative mandate. However, Greenlining would oppose such a mandate and urge that any legislation also call for a radical change in CRA ratings and the requirement that all CRA exams include small business and home lending records by race and ethnicity (that is, legislation modifying Reg B and ending the so-called “color-blind” analysis of lending data).

Respectfully submitted,

Robert Gnaizda
Policy Director
The Greenlining Institute

Vina Ha
National Banking Fellow
The Greenlining Institute

Jorge Corralejo
Board Member
Latin Business Association

MaryAnn Mitchell
Board Chair
National Black Business Council, Inc.

Last Updated 09/08/2004 regs@fdic.gov

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