From: Ben Dookchitra [mailto:dokchtra@alumni.princeton.edu]
Sent: Sunday, September 19, 2004 11:16 PM
To: Comments
Subject: Community Reinvestment -- RIN 3064-AC50
I am commenting in opposition to the proposed revisions to 12 CFR 345
implementing the Community Reinvestment Act (CRA) that would change the
definition of "small bank" to raise the asset size threshold to $1
billion regardless of holding company affiliation. However, I support
the addition of a community development criterion to the evaluation of
small banks without a change to the definition of "small bank."
To my knowledge, a significant number of banks operating in
underserved urban areas possess assets between $250 million and $1
billion. These banks' ability to be designated as "small banks" would
allow them to effectively circumvent many CRA regulations to which they
are currently bound. Whereas some may consider this change (in
conjunction with the addition of a community development criterion to
the evaluation of small banks) a "streamlining" of the process, I would
argue that it weakens the intent of the CRA and reduces service to
low-income communities, particularly in urban areas.
Importantly, I do not feel that the existing CRA structure hinders
the operation or profitability of small or large banks. That is, small
and large banks are not hurt by current regulations. To the contrary, I
believe that the current regulatory structure opens up profit-making
opportunities for banks that the risk-averse management of financial
institutions would not otherwise pursue. Some would make the claim that
banks are inherently discriminatory and that the CRA makes them "play
fair" -- I will not make this claim, but will instead point to the
numerous available data demonstrating (1) lack of activity by financial
institutions in low-income areas prior to CRA; and (2) profitability of
activities by financial institutions in low-income areas (presumably
driven by CRA). My point is that the system is not broken-- quite the
contrary. We don't need to fix it or tweak it.
On a personal level, I have worked in low-income urban communities
for the better part of the last decade and can attest to the tremendous
work in these communities of "large" banks (which could be re-classified
as "small" by the proposed regulations) that presumably (i.e. generally
understood by all parties at the table) was driven by a desire to meet
CRA goals. Colleagues in other cities to whom I have spoken have met
with much less success; it is in these cities that the Federal
government must continue to wield its strongest levers for improved
services, as the goals of CRA have not even come close to being met. The
CRA and related regulations as currently conceived are perhaps the
strongest levers of all.
And, as mentioned before, the financial institutions will probably
turn a tidy profit. (but I am sure that FDIC never gets a thank you).
Please do not alter the CRA to redefine "small banks."
Thank you for your time and consideration,
Ben Dookchitra
