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LOW INCOME INVESTMENT FUND
From: Abbie McBride [mailto:amcbride@liifund.org]
Sent: Wednesday, September 15, 2004 3:43 PM
To: Comments
Cc: Mark Pinsky (E-mail); Judith Kennedy (E-mail); Nancy O. Andrews
Subject: Community Reinvestment -- RIN 3064-AC50
***VIA EMAIL***
September 14, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
The Low Income Investment Fund (LIIF) urges you to withdraw your
proposed changes to the Community Reinvestment Act (CRA) regulations.
CRA has been instrumental in increasing homeownership, boosting economic
development, and expanding small businesses in the nation's immigrant,
low- and moderate-income, and people of color communities.
LIIF is a national community development financial institution (CDFI)
based in Oakland, California with offices in Los Angeles, San Francisco
and New York City. LIIF specializes in providing capital and technical
assistance to organizations working to alleviate poverty in low income
neighborhoods. Since its inception in 1984, LIIF has provided
approximately $440 million in financing and technical assistance for
projects benefiting low income communities, leveraging investments over
$3.4 billion. These projects have made a significant difference in the
lives of low income families, supporting:
* 48,000 units of low income and special needs housing (75
percent serving very-low income people),
* 17,200 child care spaces,
* 2,000 school spaces, and
* 1.7 million of commercial space.
LIIF, and more importantly the communities and people that we serve,
have benefited greatly from CRA. CRA has been a powerful impetus for
loans to community development organizations from private capital
markets. It has brought millions of private dollars to the country's
neediest communities to leverage public funding.
Under the current CRA regulations, banks with assets of at least $250
million are rated by performance evaluations that scrutinize their level
of lending, investing, and services to low and moderate-income
communities. The proposed changes will eliminate the investment and
service parts of the CRA exam for state-charted banks with assets
between $250 million and $1 billion. In place of the investment and
service parts of the CRA exam, the FDIC proposes to add a community
development criterion. The community development criterion 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.
Under the proposed changes, there would be no requirements for banks
with up to $1 billion in assets to engage in community development
lending and investments-activities that leverage limited public
subsidies to provide affordable housing and community and economic
development. Without this regulatory impetus, many institutions will
significantly reduce their activity in low income communities because,
in general, they view such activity as higher risk and/or less
profitable than more traditional investing.
The FDIC proposal would significantly harm community development
activities across the country. As an example, if enacted, 122 of banks
in California, or 84 percent of the State's institutions, would be
eligible for the streamlined exam. Meanwhile, 89 percent of California's
rural financial institutions would become eligible for the reduced
community development requirement. 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 opposite
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,
Nancy O. Andrews
President and CEO
cc: Judy Kennedy, President, National Association of Affordable
Housing Lenders
Mark Pinsky, President & CEO National Community Capital Association
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