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FDIC Federal Register Citations

Wisconsin Partnership for Housing Development

From: Bill Perkins [mailto:billperkins@wphd.org]
Sent: Monday, September 20, 2004 4:45 PM
To: Comments
Subject: Comments on Proposed Changes to CRA Regulations

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St NW
Washington DC 20429

Dear Mr. Feldman:

The Wisconsin Partnership for Housing Development, Inc. respectfully requests that you reconsider the FDIC's proposed changes to the Community Reinvestment Act (CRA) regulations. As I'm sure you agree, CRA has been extremely important as an incentive for sound investments in expanding affordable housing options and home ownership. It has also helped to stimulate investments in job creation and entrepreneurship in low and moderate income and minority communities. We believe that the proposed changes to the CRA regulations changes are also inconsistent with the Administration's stated goals of improving the economic status of immigrants and creating 5.5 million new minority home owners by 2010.

" Small" banks are extremely important to housing and economic development in Wisconsin. We are a state distinguished by a vital role for smaller, independent lending institutions. In 1990, I was appointed by President George H.W. Bush as the first "community interest director" on the Federal Housing Finance Board. I served in that capacity through 1993, and oversaw the implementation of the Affordable Housing Program and other community reinvestment initiatives within the Federal Home Loan Bank System. That experience reinforced my awareness of the critical importance of CRA in encouraging lenders to fully consider ways in which they can contribute to community development. In my role on the Finance Board, I was an outspoken advocate for ensuring the financial health and competitiveness of smaller community-based thrifts and banks, because I believe they play a unique role in the nation's credit framework. Because of their unique role, I also believe we need to maintain a strong role for those institutions in community reinvestment.

I offer some more specific comments:

• Under 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 to the regulations would eliminate the investment and service tests for banks and thrifts with assets between $250 and $1 billion. The proposal would make 879 state-chartered banks with over $392 billion in assets eligible for a more cursory CRA examination. More than 5,000 state-chartered banks regulated by the FDIC have less than $1 billion in assets. These banks represent almost 96% of all FDIC-regulated state-chartered lending institutions. Banks with assets between $250 million and $1 billion have 7,860 branches in communities across the country.

• In my own organization's work as a developer of affordable housing and as a provider of HUD-funded technical assistance to other nonprofit developers, we have made extensive use of Low Income Housing Tax Credits. LIHTCs are a valuable tool, but their complexity can be daunting to smaller banks and thrifts in their roles as both lenders and investors. The investment test is an important incentive to smaller banks and thrifts who, in turn, are particularly important sources of capital in smaller communities and rural areas. Services such as branches, checking accounts, Individual Development Accounts (IDAs) and debit card services, which are addressed by the service test, are also of crucial importance to communities where small banks and thrifts have a vital role.

• We do not believe that the proposed community development criterion will adequately replace the investment test. Currently, lending institutions between $250 million and $1 billion in assets must meet all three of the CRA's tests -- lending, investment and services. Allowing lenders to choose one of the three tests based on the lender's needs rather than the community's needs will not serve the community development needs of low and moderate-income communities. It also will not encourage lenders to use their creativity to find the best ways to meet those needs, which we believe is a fundamental purpose of the CRA.

• We do not believe that the elimination of small business lending data reporting requirements for banks between $250 million and $1 billion in assets furthers the purposes of the CRA.

• We also strenuously object to the proposed provision that community development activities in rural areas be considered as meeting the requirements of the CRA irrespective of the income levels of the beneficiaries of the activities. That would be comparable to allowing any activities in a central city to be considered as meeting the requirements of the act simply because the city as a whole includes low and moderate-income neighborhoods.
I urge the FDIC to stand firm behind the purposes of the Community Reinvestment Act. "Small" banks play a vital role in the nation's communities, and we need them to continue to play a vital role in community development. The effectiveness of the CRA in meeting that objective is unquestionable, and it deserves to be protected by the FDIC and other lending regulators.

Thank you for your consideration of these comments and suggestions.

William C. Perkins
Executive Director, The Wisconsin Partnership for Housing Development, Inc.
121 S. Pinckney Street, Suite 200, Madison, WI 53703
Phone: 608-258-5560, Ext. 23 Fax: 608-258-5565
E-mail: billperkins@wphd.org

Bill Perkins
Executive Director
The Wisconsin Partnership for Housing Development, Inc.
121 S. Pinckney Street, Suite 200
Madison WI

 

Last Updated 10/04/2004 regs@fdic.gov

Last Updated: August 4, 2024