National Association for County Community and Economic Development
National Association of Counties
National Association of Local Housing Finance Agencies
National Community Development Association
U.S. Conference of Mayors
September 15, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
RE: RIN 3064-AC50; Notice of Proposed Rulemaking to 12 CFR Part 345
Dear Mr. Feldman:
We appreciate the opportunity to provide comments to you on the
Federal Deposit Insurance Corporation’s (FDIC) proposed revisions to the
Community Reinvestment Act (CRA). Our collective associations represent
the interests of thousands of city and county agencies across the
country that administer affordable housing and community development
programs for low- and moderate-income families. As such, we are deeply
concerned by the effect of the changes recommended in the above
referenced rulemaking on low- and moderate-income households.
We oppose the proposed change to the definition of “small bank.”
Currently, a small bank is defined as a bank that has assets of $250
million or less. This proposed rule would increase this asset threshold
to $1 billion, thereby allowing banks that are now classified as “large
banks” to fall under the small bank definition. This will eliminate
approximately 900 banks from having to undergo a full CRA examination.
In all, with this proposed rule, 96% of the FDIC’s banks will be exempt
from full CRA review with only 223 of the 5,291 banks supervised by the
FDIC receiving a full CRA review. Furthermore, unlike large banks, small
banks are not subject to the investment and service tests of the CRA. We
fear that this will result in less investment in low- and
moderate-income communities. To make up for the loss in the investment
and service tests, the FDIC proposes to add a mandatory community
development criterion for small banks with assets between $250 million
and $1 billion. Under this new criterion, the FDIC will assess a bank’s
record of helping to meet the needs of its assessment areas through a
combination of its community development lending, qualified investments,
or community development services. This new criterion would focus on the
entire community and not have any special reporting for low- and
moderate-income households or businesses. Besides the fact that this
criterion does not meet the requirements of the CRA in terms of
reporting on low- and moderate-income households and businesses, it is a
poor replacement for the investment and service tests which require
banks to meet a broad range of investments and services for low- and
moderate-income communities. Again, the very communities that CRA was
enacted to protect will fall victim to less investment if this proposed
rule becomes final.
Congress enacted CRA in 1977 specifically to ensure that banks and
thrifts met the lending, investment, and service needs of low- and
moderate-income households in their communities. We believe that the CRA
has been the driving force behind increased lending, investment, and
banking services in previously underserved communities. While we believe
that most banks are concerned with meeting the needs of their entire
communities, the reality is that there are some banks that would turn a
blind eye to the needs of minority and low-income neighborhoods, unless
forced to meet the needs of these households by such tools as the CRA.
Now, this proposed rule serves to weaken these protections for these
households. Changing the definition of “small bank” to raise the asset
size threshold will eliminate hundreds of existing banks from having to
undergo a full CRA examination. Since these banks will no longer be
subject to the investment and service tests of the CRA, we strongly
believe that this action will result in decreased investment and
economic opportunity in minority and low-income communities. Keeping the
focus of small banks on lending alone is not consistent with the
purposes of the CRA.
Besides our concerns with the proposed rule, we are deeply concerned
that the FDIC is attempting to change existing law – the CRA – through
regulation. If changes are made to the CRA, it should not be done under
the auspices of a few Federal agencies which choose to decide which
comments to accept in a proposed rulemaking. Instead, it should be done
in an open hearing before Congress where all sides can fairly offer
their opinions of the CRA and the merits of the Act can be questioned in
an open format. It is for this reason – and the others mentioned above –
that we are opposed to this proposed rulemaking and ask the FDIC to
withdraw it immediately.
We appreciate the opportunity to provide comments to you on this
proposed rule.
Sincerely,
National Association for County Community and Economic Development
National Association of Counties
National Association of Local Housing Finance Agencies
National Community Development Association
U.S. Conference of Mayors
|
