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FDIC Federal Register Citations

NEW HAMPSHIRE COMMUNITY LOAN FUND

Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 E. 17th Street, NW
Washington, DC 20429

September 14, 2004

RE: RIN 3064-AC50

Dear Mr. Feldman:

On behalf of the New Hampshire Community Loan Fund and the thousands of low- and moderate-income families we serve, I urge you to withdraw your proposed changes to the Community Reinvestment Act (CRA) regulations. If enacted, the FDIC will define small banks as those with $1 billion and less in assets.

Under current regulations, banks with assets of at least $250 million have performance evaluations that review lending, investing, and services to low- and moderate-income communities. You propose that state-chartered banks with assets between $250 million and $1 billion follow a community development criterion that allows banks to offer community development loans, investments, or services. This will result in significantly fewer loans and investments in low-income communities. Currently, mid-size banks must show activity in all three areas of assessment. Under the proposed regulations, the banks will now be able to pick the services convenient for them, regardless of community needs.

If enacted, this would be a body blow to the community economic development efforts in New Hampshire. A statewide community development finance institution, the New Hampshire Community Loan Fund has had a remarkably productive relationship with the New Hampshire banking community. This relationship is multi-layered. First, when we make loans for affordable housing or businesses, we inevitably find banks to partner with us. Over the twenty-one year history of the New Hampshire Community Loan Fund, we have made loans of over $61 million in community economic development projects. Our $61 million has been matched by $111 million in investments by others in these projects – nearly all of it from New Hampshire banks.

Second, we have received significant grants and gifts from the New Hampshire banking community over the years: cumulatively, over $2 million. This support has underwritten new initiatives and strengthened existing programs. No other private sector group has come close to the generosity of the banking community.

Finally, New Hampshire banks have loaned or invested over $9 million directly in the Loan Fund. These commitments, many of which are categorized as subordinated near-equity investments, have allowed us, in turn, to make loans to the community, and to attract more investments from individuals, churches, and other institutions.

Nearly all of the banks who have partnered and supported us have less than $1 billion in assets. These mid-size banks have been vitally important to our work – and they clearly have made their commitments to us, and to the low-income community, largely in response to the expectations of the CRA Act.

We have seen the impact of our work. We've helped create or preserve 3,769 units of affordable housing, 2,259 child care spaces, and 866 jobs. We've seen lives change once people learn that they can gain economic traction and share the benefits of capitalism. Yet without the partnership of the New Hampshire banking community, we would not have been able to achieve a fraction of this success.

The proposed regulation is in direct opposition to Congressional intent of the law. In a letter signed by thirty U.S. Senators to the four regulatory agencies regarding an earlier proposal (February 2004) to increase the definition of "small bank" from $250 million to $500 million, the Senators wrote, "This proposal dramatically weakens the effectiveness of CRA.... We are concerned that the proposed regulation would eliminate the responsibility of many banks to invest in the communities they serve through programs such as the Low Income Housing Tax Credit or provide critically needed services such as low-cost bank accounts for low- and moderate-income consumers."

This latest proposal would remove 879 state-chartered banks with over $392 billion in assets from scrutiny. Our understanding is that 91% of the banks currently facing CRA review in New Hampshire would no longer be subject to examination. This will have a disastrous effect on low- and moderate-income communities. Without this examination, mid-size banks will no longer have to make efforts to provide affordable banking services or respond to the needs of these emerging domestic markets.

In addition, your proposal eliminates small business lending data reporting for mid-size banks. Without data on lending to small businesses, the public cannot hold mid-size banks accountable for responding to the credit needs of small businesses. Since 95.7% of the banks you regulate have less than $1 billion in assets, there will be no accountability for the vast majority of state-chartered banks.

Your proposal would seem to be especially harmful in rural communities such as New Hampshire. The proposal seeks to have community development activities in rural areas counted for any group of individuals regardless of income. This particular provision about rural lending would completely undermine the intent of the CRA law to help those with low and moderate incomes gain economic opportunity.

The FDIC should be doing more to strengthen the CRA and support our communities. We fear that your proposal does just the opposite.

The impetus for the creation of the CRA was to encourage federally insured financial institutions to meet the credit and banking needs of the communities they serve, especially low- and moderate-income communities. We have seen this work effectively here in New Hampshire. This proposal undermines the intent of CRA, and threatens to undo the years of effort to bring "unbanked" consumers into the financial mainstream. I urge you to remove this dangerous proposal from consideration.

Sincerely,

Juliana Eades
President
New Hampshire Community Loan Fund
7 Wall Street • Concord, New Hampshire 03301

cc: Senator Judd Gregg
Senator John E. Sununu
Congressman Jeb Bradley
Congressman Charles Bass

Last Updated 10/07/2004 regs@fdic.gov

Last Updated: August 4, 2024