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OREGON MICROENTERPRISE NETWORK
September 16, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW
Washington, DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
The Oregon MicroEnterprise Network 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.
Many of the most significant changes in urban and rural neighborhoods
over the last 15 years are a result of the CRA related activities. The
proposed changes curtail future development in those very communities
that are beginning to show recovery in investment. It will also 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. How can an administration hope to promote community
revitalization and wealth building when it proposes to dramatically
diminish banks’ obligation to reinvest in the communities where they get
their customers?
Don’t Go to the “Choose a Test Approach”
The proposed asset threshold 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 require
banks to offer community development loans, investments or services.
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 your proposal, a mid-size
bank can now choose a community development activity that is easiest for
the bank instead of providing an array of community development
activities needed by low- and moderate-income communities.
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.
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-charted 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.
Only 4 banks in Oregon will be subject to the higher standards of CRA.
Critical On-Going Efforts Will Be Eliminated
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.
Don’t Limit Data Disclosure
Another destructive element in your 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. 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.
Rural Rule Changes
Lastly, to make matters worse, you propose that community development
activities in rural areas can benefit any group of individuals instead
of only low- and moderate-income individuals. Since a significant number
of rural residents are affluent, your proposal threatens to divert
community development activities away from the low- and moderate-income
communities and consumers that CRA targets. Your proposal for rural
America merely exacerbates the harm of your proposed streamlined exam
for mid-size banks. Your streamlined exam will result in much less
community development activity. In rural America, that reduced amount of
community development activity can now earn CRA points if it benefits
affluent consumers and communities. What’s left over for low- and
moderate-income rural residents are the crumbs of a shrinking CRA pie of
community development activity.
Conclusion
In sum, your proposal is directly the opposite of CRA’s statutory
mandate of codifying a continuing and affirmative obligation to meet
community needs. Your proposal will dramatically reduce community
development lending, investing, and services. You compound the damage of
your proposal in rural areas, which are least able to afford reductions
in credit and capital. You also eliminate critical data on small
business lending. 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.
If your agency was serious about CRA’s continuing and affirmative
obligation to meet credit needs, you would be proposing additional
community development and data reporting requirements for more banks
instead of reducing existing obligations. A mandate of affirmative and
continuing obligations implies expanding and enlarging community
reinvestment, not significantly reducing the level of community
reinvestment.
CRA is too vital to be gutted by regulatory fiat and neglect. If you
do not reverse your proposed course of action, we will ask that Congress
halt your efforts before the damage is done.
Sincerely,
John Blatt
Cc: National Community Reinvestment Coalition
President George W. Bush
Senators John Kerry and John Edwards |
