Hello colleagues:

Many of you have been following this year's attacks on the Community Reinvestment Act (CRA) -- the federal law which has served since 1977 as a powerful tool for grassroots action against bank practices that undermine local economies and diminish opportunities in many U.S. communities.

Once again, the CRA is under direct attack, this time in the Senate (the House version passed last week by a wide margin). ACTION IS NEEDED -- I have been told by one advocate that his contacts in the Senate are troubled by the VIRTUAL SILENCE this time from constituents across the country. This is surely wrong, because I know of many actions being taken, but it shows that we all need to rally once again.

Below are some very useful "talking points" and a sample letter you might want to review, prepared by the National Community Reinvestment Coalition (their phone number is listed as well). Please put out the call, and take action as best you can during this crucial period. Sincerely, Maryellen

~~~~~~~~~~~~~~~~~~~~~~ NCRC Alert: Community Reinvestment Act in Danger. Act Now to Oppose Financial Modernization and anti-CRA Bills

Dear Friends of Community Reinvestment:

Small business, affordable housing, and economic development lending and investing will decline if Congress enacts so-called financial modernization legislation without major changes recommended by the National Community Reinvestment Coalition (NCRC). Please use the talking points below to start visiting and calling your Senators and Representatives to oppose this legislation.

The House and Senate are considering different versions of financial modernization legislation. The House's version is called HR 10, while the Senate's bill does not yet have a number. The House Banking Committee did a mark-up and approved HR 10 on March 11(during a mark-up, a committee considers amendments to a bill). The next stop for HR 10 is the House Commerce Committee in mid-April. On the House side, it is particularly important to contact Representatives on the Commerce Committee and the House Leadership (see below).

The Senate Banking Committee did a mark-up and approved a bill on Thursday, March 4. Action on the Senate bill is expected in early to mid-April. The Senate bill is much worse than the House bill; it would cripple CRA if it was passed. The President has pledged to veto the bill, but we will need your help in defeating this destructive bill. It would be dangerous for the Senate to pass the bill and then have a House-Senate conference committee consider it.

The National Community Reinvestment Coalition (NCRC) is the nation's CRA trade association of more than 690 community organization members. Please call us on (202) 628-8866 if you have any questions. Also, please carbon copy us in any letters you write on financial modernization legislation. Our fax number is (202) 628-9800, our web site is ncrc.org, and our mailing address is 733 15th St. NW, Suite 540, Washington DC 20005.

Senate Bill Worse than the House Bill: Attacks Core of CRA

The Senate Banking Committee approved a bill, the Financial Services Modernization Act of 1999, on March 4 (bill does not yet have a number). Below are the major provisions of the Senate bill that attack CRA:

… Safe Harbor Provision: A bank or thrift is designated as complying with CRA if its ratings during the last three years are Satisfactory and above. A community group commenting on a merger application or any other bank application bears the burden of proof in demonstrating that CRA performance is below Satisfactory. If the community group is unable to do so, its comments on the pending merger would not be considered valid by the federal banking agency considering the merger.

… This version of safe harbors makes it nearly impossible to comment on pending mergers. For example, if a large bank has an overall Satisfactory or Outstanding rating, its performance across states or metropolitan areas is still likely to be uneven. It may have received a "low Satisfactory" as its rating in a particular state or it may have a failing rating on one of the tests in the CRA exam (large banks have separate tests looking at their record in lending, making investments, and offering services to low- and moderate-income borrowers and neighborhoods). An overall grade of Satisfactory or Outstanding hides these areas of weaknesses. Community groups should have every right to request that regulatory agencies address areas of weakness, and should not be prevented from doing so by an overall grade of Satisfactory or Outstanding.

… Small Bank CRA Exemption: The bill exempts all banks under $100 million in assets from CRA. More than 6,300 banks and thrifts would be exempted. This equals 60 percent of all depository institutions in the country. Low- and moderate-income populations in small towns and rural areas would be particularly hard hit. Many rural small banks enjoy a near monopoly in their service areas. They will have little incentive to serve minorities and working class customers if CRA obligations are removed.

… The Senate bill also removes the modest requirement now in the House bill that a bank must have at least a Satisfactory rating in order to engage in insurance and securities activities. Less than 2 percent of banks and thrifts evaluated under CRA in the last few years have received failing ratings. These banks are truly not performing. It is not fair to communities nor to banks with passing ratings to let the failing banks enjoy new powers and enter new markets.

Talking Points on HR 10 (the bill on the House Side)

… Financial modernization legislation such as HR 10 would allow banks, insurance companies, and securities firms to own each other. Currently, there are limits on cross-industry ownership. HR 10 would wipe out the limits.

… HR 10 weakens CRA since it does not expand CRA-like obligations to insurance companies, securities firms, mortgage companies, and other financial companies allowed to affiliate with banks. Holding companies can shift their assets from banks and thrifts to the CRA-exempt affiliates and subsidiaries. Banks will have fewer resources with which to make home and small business loans to minority and working class borrowers.

… HR 10 does expand CRA to wholesale financial institutions (known as woofies). A woofie is a new type of investment bank that would not be federally-insured and could only accept deposits greater than $100,000. This is positive, but remember that wholesale financial institutions are only one of the financial companies that would be allowed to affiliate with banks under HR 10.

… Holding companies are now shifting bank products, as well as assets to non-depository institutions. Over the next few years, State Farm's 16,000 insurance agents throughout the country will make loans on behalf of State Farm's new thrift. The Office of Thrift Supervision claims that it does not have the statutory authority to apply CRA beyond the headquarters office of State Farm's thrift in Bloomington, Illinois. If financial modernization does not expand CRA to cover the banking activities of insurance companies and other non-depository institutions, HR 10 will result in CRA covering a shrinking amount of traditional banking activities.

… HR 10 would permit most mergers (under $40 billion in assets) between banks and non-depository institutions to occur without an application requirement to federal banking agencies. Federal banking agencies would be unable to review the safety and soundness or CRA issues of these mergers. Community groups would not be able to comment to federal agencies at all on these mergers.

What a Pro-CRA Bill Would Include

… Expand CRA to all companies allowed to affiliate with banks: CRA and community reinvestment obligations must be expanded to all financial companies allowed to affiliate with banks, including mortgage companies, insurance firms, and securities firms. This would prevent the shifting of assets and products from banks into firms exempt from CRA. Also, access to insurance policies, mutual funds, and other capital accumulation tools will be increased for low- and moderate-income people and communities if CRA-like obligations are expanded broadly to all segments of the financial industry.

… Expand CRA to all non-bank affiliates that offer loans and other bank services: CRA will cover a much smaller portion of the lending activity in the country if it remains confined to banks while insurance agents, mortgage companies, and other financial companies continue to expand their lending business. It is feasible for federal regulatory agencies to construct CRA exams covering the lending, investing, and service activities of mortgage companies and other non-depository institutions engaged in banking.

… Require insurance companies to disclose data: The HMDA (Home Mortgage Disclosure Act) data has been instrumental in helping banks and community groups identify missed market opportunities in minority and working class neighborhoods. Like banks, insurance companies must be required to publicly disclose data on the characteristics of their customers including race, income, and the neighborhoods in which they reside. Data disclosure will tremendously increase access to home, automobile, and small business insurance products for traditionally underserved people.

… Merger Application Requirement: A key time for CRA enforcement occurs when banks seek permission from federal regulatory agencies to merge. The agencies must consider community group comments on the CRA records of banks. The comment process has been instrumental in securing CRA agreements and bank commitments to make specific dollar amounts of loans and investments in minority and working class neighborhoods in future time periods. The financial modernization bills currently exempt most mergers between banks and non-depository institutions (such as insurance companies) from application requirements that involve reviews of CRA performance. Any bill must have application requirements for all types of mergers.

Proof that CRA Works

… CRA has led to dramatic gains in reinvestment. In the last twenty years, community organizations and banks have negotiated more than 360 agreements totaling more than $1 trillion of loans and investments for minority and working class neighborhoods. Most of these agreements were in the last five years, or during the most profitable era of banking in the United States. CRA loans are profitable, and are now being sold on Wall Street. CRA is a win-win for banks and neighborhoods.

… Home purchase lending has increased dramatically. Low- and moderate-income borrowers received 28 percent of all home purchase loans in 1997 - up from 18 percent in 1990. Blacks and Hispanics received 14 percent of home mortgage loans - up from 10 percent in 1990.

… Add some data and information you have about local CRA success stories. Share these with NCRC.

Who to Contact in the House and Senate

… The capitol hill switchboard number is (202) 224-3121.

… On the Senate side: All 100 Senators must hear from us. Important leaders include Senator Paul Sarbanes (D-MD), who is the ranking member of the Banking Committee. Democrats will take their cue from Senator Sarbanes on banking issues. The Senator must stand firm against the anti-CRA provisions now in the Senate bill. In addition, Majority Leader Trent Lott (R-MS) must hear from us; he may not schedule the bill for a floor vote if he believes it is controversial. Also, Senator Thomas Daschle (D-SD) is the Democratic Leader in the Senate.

… On the House side: The House leadership must start hearing from us. This includes Speaker of the House J. Dennis Hastert (R-IL), House Majority Whip Tom Delay (R-TX), Minority Leader Dick Gephardt (D-MO), and Democratic Whip David E. Bonior (D-MI). The Commerce Committee is the next stop for HR 10. See the list below for their membership.

… Call us on (202) 628-8866 if you have any questions, and please carbon copy us on any letters you write.

March 18, 1999

SAMPLE LETTER TO CONGRESS (Please modify and put on your stationary)

Dear Member of Congress:

As a community development (advocacy, fair housing, etc.) organization, we urge you to protect and modernize the Community Reinvestment Act (CRA). We particularly urge you to make sure that any financial modernization legislation that comes before Congress this year expands CRA rather than weakens it. A strong and vibrant CRA has meant that hundreds of billions of dollars worth of new home mortgage and small business loans have been made in the low- and moderate-income urban and rural communities of our nation during the past several years.

We appreciate the attention that CRA has received from House Banking Chairman Leach and Ranking Democrat LaFalce as the House Banking Committee has considered HR 10. While HR 10 has a modest CRA provision, it fails to deal with a fundamental problem of financial modernization; the ability of financial conglomerates to offer loans through their holding company affiliates, without that activity being covered by CRA. Under current law, a holding company can own a depository institution, whose lending is covered by CRA, while also owning a mortgage company or a subprime home equity lender whose activities are not covered by CRA. Financial modernization, in its current form, will only exacerbate this problem as insurance companies and securities firms also begin lending in our communities without a fully effective CRA covering their activities.

While CRA is meant to give all Americans fair and equal access to credit, many of us are also becoming increasingly concerned by unfairness in the insurance industry. Discrimination in the provision of insurance can be as damaging to our communities as discrimination in lending has been.

The insurance industry will reap tremendous benefits with the passage of a bill like H.R. 10. In exchange for expanding their ability to conduct business, we believe it is fair to requiring insurance companies to collect and make public Home Mortgage Disclosure Act-like information on policy underwriting. Data disclosure requirements help communities, insurance companies, and public agencies identify missed market opportunities and eliminate discriminatory practices.

Financial modernization legislation must include a vigorous application and public comment process for mergers within the financial industry. On a practical level, full enforcement of the Community Reinvestment Act depends on the ability of citizens to intervene in the application process and bring information forward that the regulators are unable to gather on their own.

Mergers and acquisitions can disrupt the lives of thousands of citizens in a community through job losses, closing of offices, decreases in lending, and higher fees. Affected citizens ought to have the right to speak up and have their concerns addressed before a merger application is approved. H.R. 10, in its present form, would exempt mergers between banks and non-depository institutions that involve less than $40 billion in assets from application requirements. H.R. 10 and any other version of financial modernization must include application requirements, public comment periods, and CRA reviews for all proposed mergers. We have found little demand for financial modernization among the constituencies that we serve and represent. We have, however, found many citizens increasingly concerned about anti-competitive impacts of large bank mergers. Financial modernization may in fact multiply these problems for our communities, while primarily providing benefits for the wealthiest people in our country.

Finally, we urge you to be vigilant and fight against any direct attacks on CRA. The bill passed by the Senate Banking Committee is totally unacceptable. It exempts small banks under $100 million from CRA altogether. More than 6,300 banks or 60 percent of all lenders in the country will then have no obligation to serve minority and working class neighborhoods. Moreover, the Senate bill contains a "safe harbor" provision making it nearly impossible for community organizations, elected officials, and ordinary citizens to comment to federal banking agencies on pending bank mergers that would affect their communities.

Congress has required that banks serve "the convenience and needs" of the communities in which they are chartered because of the vital role they play in our lives. We believe that this same standard should be applied to the entire financial industry. The Community Reinvestment Act has expanded the American Dream of home and small business ownership for millions of minority and working class Americans. A financial modernization bill that carefully modernizes the Community Reinvestment Act to the entire financial industry could have a profound effect in democratizing access to credit and capital accumulation tools in our society. That would be good for America.

We urge you to protect and modernize the Community Reinvestment Act.

Sincerely,

************************************************ Maryellen J. Lewis Program Leader/Community Capital MSU Center for Urban Affairs 1801 W. Main Street Lansing MI 48915-1097 USA ph: 517-353-9555 fax 517-484-0068 e-mail: lewisma9@pilot.msu.edu ~~~~~~~~~~~~~~~~~~~~~~~~~~ "How long? Not long, because the arc of the moral universe is long, but it bends toward justice."

Rev. Martin Luther King ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ .·´¯`·.¸ > .·´¯`·.¸¸.·´¯`·.¸ .· .·´¯`·..·´¯`·.¸ > .·´¯`·.¸¸.·´¯`·.¸ ·.¸.·´¯`·.¸ > .·´¯`·.¸.·´¯ .·´¯`·.¸ ¸.·´¯`·..·´¯`·.¸.·´¯`·