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FDIC Federal Register Citations

LENDERS FOR COMMUNITY DEVELOPMENT

From: Liz Givens [mailto:liz@L4CD.com]
Sent: Thursday, September 16, 2004 4:41 PM
To: Comments
Cc: 'Eric Weaver'; naahl@naahl.org; markp@communitycapital.org
Subject: Community Reinvestment -- RIN 3064-AC50

***VIA EMAIL***

September 16, 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:

Lenders for Community Development (LCD) 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 minority communities. The proposed policies threaten to cut off the critical supply of capital that low-income communities need to improve the economic opportunities of their citizens.

LCD is a nationally recognized community development financial institution based in San Jose, California. In partnership with banks, philanthropic investors, and community-based agencies, LCD develops financial products and services to channel resources into the poorest Silicon Valley communities traditionally underserved by conventional lenders. We help low-income individuals, families and communities create economic opportunity, build financial stability, and pursue self-sufficiency.

Since 1995, LCD has successfully directed over $39 million in community investment into economically challenged neighborhoods and improved the lives of 4,500 households.

Through its Small Business Micro-Loan Program, LCD has provided over $4 million in financing to 175 entrepreneurs all over the Silicon Valley area. Of these loans, 75% have gone to minority-owned businesses, 58% to women-owned businesses, and 59% to businesses owned by low-income people. LCD has originated over $34 million in housing and facilities loans, financing 2,845 units of affordable housing and 14 new community facilities.

The communities and people that LCD serves have benefited greatly from CRA. LCD was founded through a unique partnership of local banks, both large and small, that came together to create a multi-bank community development corporation. CRA was the impetus behind this creative partnership in California and CRA 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 and particularly in LCD’s California market. If enacted, 122 of the 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. 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,

Elizabeth Storey Givens
Director of Development and Policy
Lenders for Community Development
111 W. St. John Street, Suite 710
San Jose, CA 95113
Phone: 408.297.0204 x35
Fax: 408.297.4599
liz@l4cd.com

cc: Eric Weaver, Executive Director, Lenders for Community Development; Judy Kennedy, President, National Association of Affordable Housing Lenders; Mark Pinsky, President & CEO National Community Capital Association

Last Updated 09/20/2004 regs@fdic.gov

Last Updated: August 4, 2024