Consumer Action
1 September 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, D.C. 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
Consumer Action,
a non-profit consumer education and advocacy organization serving
consumers
since 1971, urges you to withdraw your proposed
changes to the Community Reinvestment Act (CRA) regulations. CRA
has been instrumental in increasing home ownership, boosting economic
development, and expanding small businesses in the nation’s
immigrant, low and moderate income, and people of colour communities.
Under the current CRA regulations, banks with assets of at least
$250 million are rated by performance evaluations that scrutinize
their levels of lending, investing and service to low and moderate-income
communities. The proposed changes will eliminate the investment and
service parts of the CRA exam for state-chartered banks with assets
between $250 million and $1 billion. In place of the investment and
services part of the CRA exam, the FDIC proposes to add community
development criteria. The community development criteria 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.
If enacted, 879 state-chartered banks with over $392 billion in
assets would become eligible for the streamlined and cursory exam.
In total, 95.7% or more than 5,000 off the state-chartered banks
that the FDIC regulates have less than $1 billion in assets. These
5,000 banks have combined assets of more than $754 billion. In California,
there are 146 state-chartered banks located within urban areas. 122
of these, or 84%, have assets up to $1 billion and would be eligible
for the streamlined exam.
In rural California,
there are 9 state-chartered financial institutions with 8 of these
having
assets of up to $1 billion. If enacted, 89%
of California’s rural financial institutions would become eligible
for the streamlined exam. The FDIC proposal would significantly
harm community development activities in rural areas. The proposal
states that a bank’s rural community development activities
could benefit any group of individuals instead of only low and moderate-income
individuals.
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 in conflict with 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. The proposal
will particularly affect rural areas least able to afford reductions
in credit and capital. 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,
Cher McIntyre
Director of Advocacy
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