SARGENT
SHRIVER NATIONAL CENTER ON POVERTY LAW
September 13, 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:
On behalf of the Sargent Shriver National Center
on Poverty Law (Shriver Center), and as a member of the National
Community Reinvestment
Coalition, Financial Links for Low-Income People
coalition, and Chicago CRA Coalition, I urge you to withdraw the
proposed Community
Reinvestment Act (CRA) regulations that would eliminate
the investment and service parts of the CRA exam and the small
business
lending
data reporting requirement for state-charted banks with assets
between $250 million and $1 billion.
The Shriver Center
is a Chicago-based nonprofit organization that takes action to
end
poverty through law reform, public policy, and
communications strategies in the areas of welfare reform, workforce
development, affordable housing, and community development. The Shriver
Center's community investment unit coordinates FLLIP, a statewide
coalition of Illinois nonprofit organizations, community groups,
Individual Development Account providers, adult educators, government
agencies, financial institutions, and regulators, FLLIP is dedicated
to expanding financial education and asset-building opportunities
for low-income people. The Shriver Center and FLLIP recently partnered
with the Illinois Department of Human Services to implement a highly
successful financial education and Individual Development Account
(IDA) program for low-income adults. The Shriver Center also participates
in the national SEED Policy & Practice Initiative, a children's
saving program.
Nationally, your proposal would make 879 state-chartered banks with
over $392 billion in assets eligible for the watered-down CRA exam.
In total, 95.7 percent or more than 5,000 of the state-charted banks
your agency regulates have less than $1 billion in assets. These
5,000 banks have combined assets of more than $754 billion. Your
proposal will drastically reduce, by hundreds of billions of dollars,
the bank assets available nationally for community development lending,
investment, and services.
In Illinois,
over 97 percent of all banks in the state would be subject to the
watered-down
CRA exam. The proposed change would affect
70 banks in Illinois, including several banks that have contributed
to the FLLIP coalition's programs (Allstate Bank, Itasca Bank & Trust,
and Lisle Savings Bank). Those banks provided grants ranging from
$1000 to $25,000 and totaling almost $30.000. The grants were used
for activities including: community-based free financial education
classes; matching funds for Individual Development Accounts (IDAs)
to help low-income workers buy a house, start a business, go to college,
or buy a car; and scholarships for financial education train-the-trainer
sessions for nonprofit staff.
With fewer government and foundation resources available, nonprofit
financial education program providers and IDA program providers rely
on our bank partners for grants, in-kind donations, marketing and
training assistance, and access to convenient branches and affordable
products and services. We believe that the proposed rule would result
in Illinois nonprofits receiving fewer grants and resources for these
needed programs.
Banks frequently cite both CRA and business opportunities as factors
in their support financial education and asset-building programs.
An evaluation of the FLLIP program by the University of Illinois
documented that the program helped graduates increase financial literacy,
budget better, save more, open bank accounts, make investments, and
decrease use of check cashers and payday loans. Thus, a decrease
in support for financial education and asset-building programs for
low-income people would result in banks missing opportunities to
gain new customers and deposits.
The elimination of the service test would also have harmful consequences
for low- and moderate-income communities that lack mainstream banking
centers and affordable financial services. CRA examiners would no
longer expect mid-size banks to maintain the 7,860 branches affected
by this proposed rule or build needed branches in low- and moderate-income
communities. Mid-size banks would have less incentive to offer low-income
consumers affordable checking and savings accounts and other banking
services, such as remittances used by immigrants to send money home.
In place of the investment and service parts of the CRA exam, the
FDIC proposes to add a community development criterion under which
mid-size banks would have to engage in only one of three activities:
community development loans, investments, or services. In addition,
you propose to allow banks to receive CRA credit for activities in
rural areas that arc not targeted to the low- and moderate-income
populations that CRA was intended to help. These proposed changes,
too, would result in fewer banks and fewer resources supporting financial
education and asset-building programs for low-income people.
Your proposal will also decrease access to credit for small businesses,
which is directly contrary to CRA's goals. Elimination of the requirement
that mid-size banks report small business lending data by census
tracts or revenue size of the small business borrowers will hamper
efforts to hold mid-size banks accountable for responding to the
credit needs of minority-owned, women-owned, and other small businesses.
Data disclosure has been responsible for increasing access to credit
precisely because disclosure holds banks accountable.
For these reasons, the Shriver Center opposes the proposed changes
to CRA and asks that you withdraw the proposed rule.
Sincerely,
Dory Rand
Supervising Attorney, Community Investment & FLLIP Coordinator
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