MERCY HOUSING CALIFORNIA
August 27, 2004
Thomas J. Curry, Director
Federal Deposit Insurance Colporation
550 17th Street, NW
Washington, DC 20429
Dear Sir:
Mercy Housing
is a not-for-profit, national organization committed to developing
affordable, service-enriched housing for individuals,
families, and people with Special needs. Mercy Housing works with
local governments, lending institutions, investors and private organizations
to help fund our efforts. Because of our involvement in strengthening
the nation's poorest communities, we are familiar with the positive
impact that the Community Reinvestment Act (CRA) has made on strengthening
America's communities by requiring insured depository institutions
to use their deposits to meet the credit needs of low- and moderate-income
(LMI) communities.
We understand
that the FDIC shortly will consider a proposed rule change
by the Office of Thrift Supervision (OTS) to increase the
asset threshold for the CRA small bank exam from $250 million to
$1 billion. We believe this proposal could have negative consequences
for hundreds of communities, including many in rural areas, and we
urge you not to adopt it.
While we understand
that the OTS ruling is intended to help reduce regulatory burden
for
small banks, no studies have been conducted
on the potential benefits – or harm – of such a change.
There is considerable evidence to believe that proposal could have
severe, unintended consequences for the flow of much-needed private
capital and services to LMI communities.
If the FDIC adopts
the OTS' proposal, 2,000 fewer insured institutions, with assets
of
nearly $1 trillion, would have far less impetus to
provide investments and services in LMI communities – and an
estimated $5 billion that would have been available, under the current
rules, for affordable housing and community development over the
next few years would be lost.
In California, the impact will be even greater, because banks of
this size make up a greater proportion of financial institutions
here than in the nation as a whole. Also, because institutions
with assets between $250 million and $1 billion comprise a substantial
market share in rural and exurban areas, the proposed change also
means that in some states and many communities there will no longer
be any insured institutions with a CRA impetus to invest in affordable
housing, tax credits, and even financial literacy training. This
would have a disproportionate impact in the Central Coast, Northern
California, and the fast-growing Central Valley and Sierra Foothills.
As federal resources for affordable housing and community development
continue to dwindle, our nation's poorest communities can ill-afford
to lose billions of dollars in private investment and services. We
urge FDIC not to move forward with OTS' proposal, and we urge all
four bank regulatory agencies to continue to consider rule changes
that update CRA for the communities the Act is intended to serve.
Sincerely,
Greg Sparks
Regional Vice President
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