Federal Deposit
Insurance Corporation

October 14, 2004

Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

RE: RIN 3064-AC50, FDIC’s proposed rulemaking to change the definition of “small bank” under the Community Reinvestment Act to raise the asset size threshold to $1 billion regardless of holding company affiliation

To Whom It May Concern:

Thank you for giving the National Council of State Housing Agencies (NCSHA) the opportunity to comment on FDIC’s proposal to change the “small bank” threshold from $250,000 to $1 billion, thereby expanding the use of “streamlined” Community Reinvestment Act (CRA) enforcement for such banks. NCSHA opposes this proposal. We are concerned that it will reduce bank investment in Low Income Housing Tax Credits (Housing Credits), tax-exempt bonds, and other affordable housing and community development activities.

NCSHA represents the Housing Finance Agencies (HFAs) of the 50 states, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and the District of Columbia. HFAs allocate Housing Credits to encourage the construction and rehabilitation of apartments affordable to low-income families by offering a credit or reduction in tax liability for 10 years for the owners or developers of such housing. Each year, the Housing Credit program induces several billion dollars of private investment to produce nearly 125,000 apartments affordable to low-income families, the elderly, and other special needs populations for a minimum of 30 years. HFAs also issue billions of dollars of tax-exempt bonds to finance 100,000 affordable single-family home purchases and tens of thousands of affordable apartments annually.

FDIC’s proposal to streamline CRA compliance testing for banks with assets under $1 billion, combined with the Office of Thrift Supervision’s (OTS) corresponding plan, will result in 1,300 banks no longer being subject to regulator scrutiny of their investment activity. Many small banks are Housing Credit investors, and their investments enable the production of hundreds of thousands of apartments for low-income families.

CRA requirements motivate banks to invest in Housing Credits. Without that incentive, many small banks will no longer invest in Housing Credits. This impact will be most acute in rural states where banks with assets between $250 million and $1 billion comprise a substantial size of the market. We are concerned that losing small banks as investors will make it more difficult for state and local equity funds to maintain investment levels and attract new investors. These funds play a critical role in financing Housing Credit developments in rural and low-income areas that are less likely to win support from other Housing Credit funds.

We are also concerned that weakened CRA enforcement will reduce bank investment in other affordable housing and community development activities, including tax-exempt bond purchases. We should do everything we can to fulfill the CRA’s intent by encouraging small banks to maintain and increase their investment in these worthwhile activities.

If you have any questions regarding these comments, do not hesitate to contact me.

Sincerely,

Garth Rieman
Director of Policy and Government Affairs