ADRIAN
DOMINICAN SISTERS
September 13, 2004
Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 E. 17th Street, NW
Washington, DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a member of the National Community Capital Association (NCCA)
and on behalf of the Adrian Dominican Sisters, I urge you to withdraw
your proposed changes to the Community Reinvestment. Act (CRA) regulations.
If enacted, the FDIC will define small banks as $1 billion and less
with those banks having assets between $250 million and $1 billion
subject to community development criteria.
Under current regulations, banks with assets of at least $250 million
have performance evaluations that review lending, investing, and
services to low- and moderate-income communities. You propose that
state-chartered banks with assets between $250 million and $1 billion
follow a community development criterion that allows banks to offer
community development loans, investments OR services will result
in significantly fewer loans and investments in low-income communities
the very communities that the CRA was enacted to serve. Currently,
mid-size banks must show activity in all three areas of assessment.
Under the proposed regulations, the banks will now be able to pick
the services convenient for them, regardless of community needs.
The proposed
regulation is in direct opposition to Congressional intent of the
law. In
a letter signed by 30 U.S. Senators to the
four regulatory agencies regarding an earlier proposal (February
2004) to increase the definition of "small bank" from $250
million to $500 million, the Senators wrote, "This proposal
dramatically weakens the effectiveness of CRA... We are concerned
that the proposed regulation would eliminate the responsibility of
many banks to invest in the communities they serve through programs
such as the Low Income Housing Tax Credit or provide critically needed
services such as low-cost bank accounts for low- and moderate-income
consumers."
This proposal would remove 879 state-chartered banks with over $392
billion in assets from scrutiny. This will have harmful consequences
for low- and moderate-income communities. Without this examination,
mid-size banks will no longer have to make efforts to provide affordable
banking services or respond to the needs of these emerging domestic
markets.
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. Since 95.7 percent of the
banks you regulate have less than $ 1 billion in assets, there will
be no accountability for the vast majority of state-chartered banks.
Your proposal is especially+harmful in rural communities. The
proposal seeks to have community development activities in rural
areas counted
for any group of individuals regardless of income. This could divert
services from low- and moderate-income communities in rural areas
where the needs are particularly great. Wyoming and Idaho would have
NO banks with a CRA impetus to both invest in and provide services
to their communities. Vermont, Alaska, and Montana would only have
one bank each. Commenters advocating for this change state that raising
the limit to $1 billion would have only a small effect on the amount
of total industry assets covered under the large bank tests. I think
this would be very hard to justify to the low-income communities
in Idaho left without meaningful services.
In the Michigan Lenawee County area alone the impact to those in
the lower income rural areas here will be significant. One of our
major banking institutions could no longer choose to keep opportunities
open to those most in need of loan capital. Access to capital is
most crucial to this faction of society.
Instead of weakening the CRA, the FDIC should be doing more to protect
our communities. CRA covers only banks and does not differentiate
between stand-alone banks and banks that are part of large holding
companies. All financial services companies that receive direct or
indirect taxpayer support or subsidy should have to comply with the
CRA. Small banks that are part of large holding companies should
have to conform to the CRA's standards that are more stringent.
CRA exams look at a bank's performance in geographical areas where
a bank has branches and deposit-taking ATMs. In 1977, taking deposits
was a bank's primary function. In 2004, banks no longer just accept
deposits: they market investments, sell insurance, issue securities
and are rapidly expanding into more profitable lines of business
like electronic banking. Defining CRA'
assessment areas based on deposits no longer makes sense. Customer
base should be the focus for CRA assessment. For instance, if a Philadelphia
bank has credit card customers in Oregon, it should have CRA obligations
there.
The regulators also must protect consumers from abusive lending.
The FDIC's proposal completely ignores this issue. Predatory lending
strips billions in wealth from low-income consumers and communities
in the U.S. each year. Borrowers lose an estimated $9.1 billion annually
due to predatory mortgages; $3.4 billion from payday loans; and $3.5
billion in other lending abuses, such as overdraft loans, excessive
credit card debt, and tax refund loans. Without a comprehensive standard,
the CRA becomes nearly meaningless. The regulation should contain
a comprehensive, enforceable pro\: L Lo consider abusive ptactices,
and assess CRA compliance accordingly, and it must apply to ALL loans.
The impetus for the creation of the CRA was to encourage federally
insured financial institutions to meet the credit and banking needs
of the communities they serve, especially low- and moderate-income
communities. This proposal undermines the intent of CRA, and threatens
to undo the.years of effort to bring unbanked consumers into the
financial mainstream. I urge you to remove this dangerous proposal
from consideration.
Sincerely,
Kathleen Nolan, OP
General Councilor
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