FDIC Federal Register Citations

October 20, 2004

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

RIN number 3064-AC50

To Whom It May Concern:

We, the undersigned organizations, represent a broad and diverse coalition of organizations committed to increasing the flow of private capital to our nation’s low- and moderate-income (LMI) communities.

We are very concerned that the proposed rule changes by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) to offer “streamlined” testing under the Community Reinvestment Act (CRA), to institutions up to $1 billion in assets, will harm affordable housing and community and economic development in LMI communities, particularly in rural areas.

CRA was enacted to encourage federally insured financial institutions to meet the credit needs of their communities, including LMI persons. Communities and nonprofit corporations partner with banks to leverage limited federal subsidies with private capital for meeting communities’ needs.

The great, but little known, story of CRA is of all the partnerships between banks and nonprofit providers to meet communities’ credit needs throughout America. The proposal to increase the threshold for “streamlined” testing under CRA to institutions up to $1 billion in assets will pull the rug out from many of these partnerships.

From the FDIC’s own data, the proposed rule change by 2 of the 4 bank regulatory agencies would eliminate any regulatory incentive for at least 1300 banks to include LMI persons in their community services and investments. It appears that some states – Wyoming and Idaho -- would have no bank charters with a CRA impetus both to invest in, and provide services to, their communities, while others – Vermont, Alaska, and Montana – would only have one.

Because institutions with assets of $250 million to $1 billion comprise substantial market share in rural areas, this change means that many rural communities and states will not have any institutions required to offer services and investments that benefit low- and moderate-income communities.

We agree with the description of the proposal by Senator Paul Sarbanes, ranking member of the Senate Banking Committee, as an “extreme action” and “bad policy”, and urge you not to adopt it. Now is not the time to reduce the private capital available to leverage dwindling Federal resources. All communities deserve evidence that financial institutions enjoying the benefits of Federal deposit insurance are documenting how they are helping to meet the credit needs of their communities.

Sincerely,