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Federal Register Publications

FDIC Federal Register Citations



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FDIC Federal Register Citations

 

September 14, 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:

I am a concerned citizen opposed to watering down CRA (Community Reinvestment Act) requirements for mid-sized banks. CRA is vital for increasing homeownership and economic development in lower-income communities. However, your proposed changes will halt the progress that has been made and indeed could devastate the New Hampshire Community Loan Fund which in turn would have a crippling impact on housing and community development.

I understand that banks with over $250 million in assets must be tested on their number of loans, investments, and services to low- and moderate-income communities. But your proposal would eliminate the investment and service requirements for all banks with under $1 billion in assets. This will result in significantly fewer loans and investments in affordable rental housing, health clinics, community centers, and economic development projects.

In the watered-down exam, you would allow mid-sized banks to choose which community development activities they will undertake. Right now, these banks must make community development loans, investments, and services. Your proposed test allows banks to choose only one of the three activities. The result will be less community development activity. I have already had one bank tell a community group working on an investment from the bank be told that they want to wait – they want to see if they have to do it. I think you underestimate how important these regulations are in getting banks to do what they will piously tell you is good to do.

You also propose that community development activities in rural areas should benefit any group of individuals instead of only low- and moderate-income individuals. But this will allow banks to cherry-pick and focus on affluent residents of rural areas rather than the lower income consumers CRA targets. We already have trouble enough with cherry-picking. A few years ago I documented that one rural bank was collecting deposits in a very poor town (where its headquarters was) but doing the bulk of its lending in a wealthy community nearby that at the time they didn’t even have a branch in. They were taken to task for this in their next CRA exam and subsequently forced to develop a lending plan for their home town. These tools are critical in rural areas. PLEASE do not take these tools away from us.

Finally, you would also eliminate publicly available data on the small business lending of mid-sized banks. Without data, community groups and citizens cannot hold banks accountable for lending to small businesses in their neighborhoods. We have used this data repeatedly to document lending “holes” (such as loans between $25,000 and $100,000) and to then get banks to develop plans for addressing those credit needs.

Your changes directly oppose CRA’s mandate to require lenders to meet community needs. CRA is too important to be gutted. Please drop your proposal like the two other federal agencies that recognized its harm to underserved communities.

Banking consolidation as well as growth has created midsize banks out of what were once community banks. Some have not grown into the obligations that go with being larger and need regulations to force them to learn how to behave according to their size. These banks still rest on the myth that community banks are by definition good banks that meet the needs of their communities. I would suggest that maybe a quarter of them take that adage seriously and work diligently with the community as they grow. The rest have to be taught how to make new kinds of investments, taught to deal with larger loans and to address new communities. Some do that more gracefully than others. And some complain mightily about having to now comply with regulations that other big banks have been complying with for years, wanting to be bigger without having to play by all the rules of being bigger. CRA is essential to making sure that they learn these lessons. PLEASE DO NOT MAKE THE PROPOSED CHANGES.

Sincerely,

Martha Yager

Cc:

National Community Reinvestment Coalition
President George W. Bush
Senators John Kerry and John Edwards
Senator John Sununu

Last Updated 09/16/2004 regs@fdic.gov

Last Updated: August 4, 2024