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FDIC Federal Register Citations


Mississippi Low Income Child Care Initiative

From: Carol Burnett [mailto:cburnett@mschildcare.org]
Sent: Monday, October 04, 2004 1:32 PM
To: Comments
Subject: SPAM::RIN 3064-AC50

Dear Mr. Feldman:

Below you will find comments on each of the proposed rule changes:

1) The FDIC seeks comment on whether the small bank definition threshold of less than $1 billion is appropriate.
In Mississippi, the proposed rule change will curb the community reinvestment activity of approximately of 170 bank branches that hold roughly $ 4.7 billion n deposits. According to FDIC Summary of Deposits and Statistics on Depository Institutions databases, of the 170 bank branches that would fall under the new “small bank” definition, roughly 130 serve rural areas.

Under the proposed rule change the 130 branches serving rural areas would have significantly fewer requirements to engage in affordable home lending, to invest in small businesses and to educate consumers about managing their finances. Additionally, rural consumers often face fewer banking choices than their urban counterparts. As rural banks scale back community investments to the regulatory minimum, the proposed policy will create an environment where rural consumers increasingly turn to subprime and predatory financial institutions to conduct financial transactions.

Given the suggested policy’s potential to diminish access to affordable financial products in rural areas, we deem that the proposed “small bank” definition threshold of less than $1 billion is disproportionately targeted towards rural consumers with fewer banking choices. We therefore recommend that the FDIC maintain its current bank size definitions.

2) The FDIC seeks comment on whether or not a community development performance criterion that offers choices to banks should be included in future CRA exams.

In the FDIC notice of proposed rulemaking, the FDIC recommends a community development criterion that the banks would choose “based on the opportunities in the market and the banks’ own strategic strengths.” We deem the proposed community development criterion recommendation as insufficient.

Given the prevalence of medium size banks in rural areas, especially in the Mississippi where 94% of the rural institutions have assets of less than $1 billion, we strongly recommend that the FDIC maintain its current bank size definitions. Many low- and moderate-income rural consumers depend on medium sized banks for housing and financial services. Medium sized banks must be held accountable for all three components of the current CRA test – community development lending, investing and services provided.

3) The FDIC proposes to change the definition of community development in rural areas from a definition that “focuses on activities that benefit low- and moderate-income individuals” to a definition that defines community development as “activity [that] could benefit either low-and moderate-income individuals or individuals who reside in rural areas”

Under the proposed definition, banks would receive equal CRA credit for a home loan to an individual residing in a high income census tract and a first time minority homeowner living in a low-income rural community. Given the equal credit of the two examples, banks would naturally gravitate towards home and commercial lending deals with perceived less risk in high income areas. Over time, low- and moderate-income rural consumers, entrepreneurs and homeowners would effectively be written out of rural bank priorities.

We strongly urge the FDIC not to adopt the expanded rural community development definition. One possible way to increase community investment in rural areas could be to more heavily rate community development partnerships that occur between banks, nonprofits and government entities to increase homeownership and small business opportunities for low and moderate income residents.

Contrary to the concerns of mid-sized banks, the CRA paperwork is not an undue burden. Over time, the CRA is an instrument that will improve the overall performance of banks.

The FDIC has exhibited strong leadership in the Mississippi by reaching out to unbanked and under banked populations through its commitment to the Money Smart program. We urge the FDIC to continue its leadership in the Mississippi by withdrawing the proposed rule changes and supporting the CRA in its current form.

Sincerely,

Carol Burnett
Mississippi Low Income Child Care Initiative
111 Rue Magnolia, Suite 204
P.O. Box 204
Biloxi, MS

 

Last Updated 10/12/2004 regs@fdic.gov

Last Updated: August 4, 2024