Philadelphia Association of Community Development Corporations
From: Sue Sierra
Sent: Friday, September 10, 2004 12:13 PM
To: Comments
Subject: Comments on RIN 3064-AC50
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:
As a member of the National Community Reinvestment Coalition, the
Philadelphia Association of Community Development Corporations 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 minority, immigrant, and low- and moderate-income
communities. Your proposed changes are contrary to the CRA statute
and Congress’ intent because they will slow down, if not halt,
the progress made in community reinvestment. The proposed changes
will thwart the Administration’s goals of improving the economic
status of immigrants and creating 5.5 million new minority homeowners
by the end of the decade.
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
be seriously deficient as a replacement for the investment and service
tests, and will result in significantly fewer loans and investments
in affordable rental housing, Low-Income Housing Tax Credits, community
service facilities such as health clinics, and economic development
projects.
Your proposal would make 879 state-chartered banks with over $392
billion in assets eligible for the streamlined and cursory exam.
In total, 95.7 percent or more than 5,000 of the state-chartered
banks your agency regulates have less than $1 billion in assets.
These 5,000 banks have combined assets of more than $754 billion.
The combined assets of these banks rival that of the largest banks
in the United States, including Bank of America and JP Morgan Chase.
Your proposal will drastically reduce, by hundreds of billions of
dollars, the bank assets available for community development lending,
investing, and services.
In Pennsylvania, 43 out of 117 banks have assets between $250 million
and $1 billion. These banks have a total of nearly $19 billion in
assets. As the umbrella organization representing 80 community development
corporations (CDCs) and other community entities in Philadelphia,
PACDC believes that these banks must be subject to strong CRA regulation.
The elimination of the service test will also have harmful consequences
for low- and moderate-income communities. CRA examiners will no longer
expect mid-size banks to maintain and/or build bank branches in low-
and moderate-income communities. Mid-size banks will no longer make
sustained efforts to provide affordable banking services, and checking
and savings accounts to consumers with modest incomes. Mid-size banks
will also not respond to the needs for the growing demand for services
needed by immigrants such as low cost remittances overseas.
Banks eligible for the FDIC proposal with assets between $250 million
and $1 billion have 7,860 branches. All banks regulated by the FDIC
with assets under $1 billion have 18,811 branches. Your proposal
leaves banks with thousands of branches “off the hook” for
placing any branches in low- and moderate-income communities.
We are also concerned at the proposed elimination of 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. Without data on lending to
small businesses, it is impossible for the public at large to hold
the 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. Your proposal will decrease
access to credit for small businesses, which is directly contrary
to CRA’s goals.
CRA creates a statutory mandate of imposing a continuing and affirmative
obligation to meet community needs. Your proposal, which will dramatically
reduce community development lending, investing, and services, is
directly in opposition to this mandate. Two other regulatory agencies,
the Federal Reserve Board and the Office of the Comptroller of the
Currency, did not embark upon the path you are taking because they
recognized the harm it would cause.
CRA is too vital to be gutted by regulatory fiat and neglect. We
urge you to reverse your proposed course of action.
Sincerely,
Susan Sierra
Policy Coordinator
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