From: Herbert Rubin
Sent: Friday, August 20, 2004 11:03 AM
To: Comments
Cc: Crystal Ford
Subject: Rin 3064-AC50
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a concerned citizen and as a scholar who has studied the many
advantages
of CRA, I urge you to withdraw your proposed changes to the Community
Reinvestment Act (CRA) regulations. CRA has been instrumental in
increasing
homeownership and economic development. Your proposed changes are
contrary
to the CRA because they will slow down the progress made in community
reinvestment.
I understand that CRA exams look at the number of loans, investments,
and
services that banks with more than $250 million in assets make to
low- and
moderate-income communities. Your proposal will eliminate the investment
and service parts of the CRA exam for banks with assets between $250
million
and $1 billion. I live in an exurban community in which several of
the
local banks (whose CRA records are moderate at best) would be exempted
under
the proposed rules. Already in my community only newer developments
receive
mortgage loans while older neighborhoods deteriorate.
To replace the investment and service parts of the CRA exam, the
FDIC
proposes to add an inadequate community development criterion. 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.
I believe that the end result will be significantly fewer loans and
investments in affordable rental housing, health clinics, community
centers,
and economic development projects.
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 place bank branches in low- and moderate-income
communities. Mid-size banks will no longer make efforts to provide
affordable checking and savings accounts to consumers with modest
incomes.
In addition, your proposal eliminates small business lending data
reporting
for mid-size banks. Without data on lending to small businesses,
the public
cannot hold mid-size banks accountable for responding to the credit
needs of
small businesses. In my town we have pressured financial institutions
to
offer alternatives to predatory pay day loans. Only the local credit
union
has cooperated; banks are already ignoring their local obligations.
You propose that community development activities in rural areas
can benefit
any group of individuals instead of only low- and moderate-income
individuals. Since a large number of rural residents are rich, your
proposal threatens to divert community development activities away
from the
low- and moderate-income communities and consumers that is the focus
of CRA.
In conclusion, your proposal is directly the opposite of CRA's mandate
of
imposing an obligation to meet community needs. Two other federal
agencies
did not embark upon the path you are taking because they recognized
the harm
it would cause. CRA is too vital to be gutted by regulators. If you
do not
reverse your proposed course of action, I will ask that Congress
halt your
efforts before the damage is done.
Sincerely,
Herbert J. Rubin
Professor Emeritus, Northern Illinois University
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