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GREENLINING INSTITUTE
September 3, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street
N.W., Washington, DC 20429.
VIA FACSIMILE AND U.S. MAIL
RE: RIN 3064-AC50
Opposition to One Billion Dollar Secrecy Proposal: Millions in
Presidential Contributions from Banks Expected
Dear Secretary Feldman,
The Greenlining Institute represents 39 minority business, consumer,
immigrant service, church and community groups, including the Latin
Business Association, The California Black Chamber of Commerce, the
National Council of Asian American Business Associations, First AME
Church, the Southeast Asian Community Center and Hermandad Mexicana
Latinoamericana.
We strongly support Chairman Greenspan’s position that the CRA
scrutiny exemption for small banks should remain at $250 million and we
strongly oppose the FDIC’s unilateral decision to raise the exemption
level to one billion dollars.
In California, where the FDIC regulates 153 institutions, the FDIC
proposal will allow 131 banks to be exempt (85 percent exempt).
Moreover, the number of exempted branches will more than double (220 to
504 exempted branches) and the amount of exempted assets will increase
by $9.5 billion.
The proposed changes are in direct conflict with the Bush
Administration’s stated goals of improving the economic status of
immigrants and creating 5.5 million new minority homeowners by the end
of the decade. It is implausible for California’s neediest communities
to move anywhere near these goals when the administration turns a blind
eye to a financial institution’s responsibilities to community
reinvestment. At a time of increased corporate transparency and
scrutiny, the FDIC decision to exempt the vast majority of its banks in
California is not only bad policy but also sends the wrong regulatory
and political signals.
Ineffective Community Development Criterion
The community development criterion would be seriously deficient as a
replacement for the investment and service tests. Mid-size banks with
assets between $250 million and $1 billion would only have to engage in
one of three activities: community development lending, investing or
services. Currently, mid-size banks must engage in all three activities.
Under the proposal, a mid-size bank can now choose a community
development activity that is easiest for the bank instead of providing
an array of comprehensive community development activities needed by
low- and moderate-income communities. Weak
The proposed community development criterion 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. It will be too easy
for a mid-size bank to demonstrate compliance with a community
development criterion by spreading around a few grants or sponsoring a
few homeownership fairs rather than engaging in a comprehensive effort
to provide community development loans, investments, and services.
Small Business Lending
Another destructive element in the proposal is the 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. This proposal would
further compound the problem of colorblindness under Reg B and become
another obstacle to community groups and regulators from holding
mid-size banks accountable to the credit needs of minority and
women-owned small businesses. Data disclosure has been responsible for
increasing access to credit precisely because disclosure holds banks
accountable. This proposal will decrease access to credit for small
businesses, which is directly contrary to CRA’s goals.
President Bush Campaign Funds
Since the FDIC decision will substantially benefit all banks under
the one billion dollar threshold, including those under $250 million who
hope to become larger or to be acquired, it is highly likely that this
decision could have major political implications. We therefore urge that
the FDIC and/or independent watchdog campaign finance organizations
compile and publish a list of political contributions by all banks,
their officers and management to the presidential campaign as of January
1, 2004 to the present. The FDIC can collaborate with organizations such
as Campaign Finance Institute, the Center for Responsive Politics and
the Center for Public Integrity for assistance on this research.
Greater Scrutiny of Very Large Banks
Many community and small business groups would be less critical of
the FDIC’s proposal if it had been accompanied by a pledge to use its
resources to:
a) more effectively scrutinize very large banks ($5 billion or more in
assets); and
b) ensure that banks with below average lending records receive a “Needs
to Improve” CRA rating rather than the “Satisfactory” or
“Outstanding” CRA ratings that are virtually guaranteed, even with a
well below average record. (Over 99 percent of very large banks receive
a “Satisfactory” or “Outstanding” rating.)
If regulators wish to expand the threshold for scrutiny, they should
first secure a legislative mandate. However, Greenlining would oppose
such a mandate and urge that any legislation also call for a radical
change in CRA ratings and the requirement that all CRA exams include
small business and home lending records by race and ethnicity (that is,
legislation modifying Reg B and ending the so-called “color-blind”
analysis of lending data).
Respectfully submitted,
Robert Gnaizda
Policy Director
The Greenlining Institute
Vina Ha
National Banking Fellow
The Greenlining Institute
Jorge Corralejo
Board Member
Latin Business Association
MaryAnn Mitchell
Board Chair
National Black Business Council, Inc.
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