From: Jsilver <jsilver@essential.org> (by way of "Maryellen J. Lewis" <lewisma9@pilot.msu.edu>) Subject: Community Reinvestment vs. Financial Modernization Legislation X-Info: comm-org

Dear Community Leader:

We need your help immediately. We request that you contact your Representatives and members of the House Commerce Committee this week. H.R. 10 will be marked-up this Friday, October 24 by the finance subcommittee of the Commerce Committee.

H.R. 10 or the Financial Services Competition Act of 1997 will have profound impacts on community reinvestment by radically altering the landscape of banking and finance. In brief, the bill would allow broad affiliations among banks, insurance companies, securities firms and other financial companies. If no additional reinvestment obligations are extended to banks and non-bank financial institutions, the progress in community reinvestment could be halted or reversed.

Below is a sample letter from NCRC which we encourage you to use as a sample letter or as talking points. Following the letter is a list of all members of the House Commerce Committee and the Democrats on the House Banking Committee (House Banking considered the bill first and then sent it to Commerce). If you need more information, please call NCRC Vice President of Research Josh Silver or Lou Green at (202) 628-8866.

October 17, 1997

Dear Chairman Bliley:

On behalf of the National Community Reinvestment Coalition (NCRC), I am writing to express the views of NCRC on the Financial Services Competition Act of 1997 or H.R. 10. NCRC is the nation¹s CRA trade association of more than 600 community reinvestment organizations dedicated to revitalizing inner city neighborhoods and rural areas. The impact of financial modernization legislation on the Community Reinvestment Act (CRA) and on reinvestment initiatives is of keen interest to our members.

It is our understanding that Rep. Michael Oxley will be holding a markup of H.R. 10 on Friday, October 24. As I stated during my testimony to the House Banking Committee this past summer, H.R. 10 could either increase the resources available for neighborhood revitalization or diminish the prospects for continued progress in community reinvestment. On the one hand, financial modernization legislation could help reinvestment initiatives if it expands community reinvestment obligations to non-bank financial institutions. On the other hand, the legislation could render CRA less effective if it does not allow CRA to evolve with the changes in the financial industry - changes which H.R. 10 would accelerate.

After considering the views of community organizations, House Banking Chairman Jim Leach (R-Iowa) agreed that CRA should be expanded. In particular, he agreed that CRA coverage should apply to wholesale financial institutions that would be authorized by H.R. 10. Other Committee members amended H.R. 10 this summer to include requirements for ³lifeline² banking and an advisory council on community revitalization. The consensus on the Banking Committee was that steps should be taken to preserve and strengthen the CRA.

Press reports indicate that the Commerce Committee has deleted some of the reinvestment provisions of H.R. 10 and may delete others during the markup. NCRC will oppose H.R. 10 if the reinvestment provisions are deleted. Specifically, we strongly believe that the following provisions must be retained:

… A Qualified Bank Holding Company Must Still Apply to Conduct New Business or Merge with other Institutions

H.R. 10 allows qualified bank holding companies to engage in activities financial in nature such as securities underwriting without applying to a federal regulator or even providing a notice to a federal regulator. A holding company will be considered ³qualified² if its depository subsidiaries have CRA ratings of satisfactory or outstanding. NCRC believes that H.R. 10 must be amended to require all bank holding companies (qualified or not) to apply to their primary regulator when they wish to conduct any financial activities in which they are not currently engaged.

NCRC further recommends that a qualified bank holding company must be required to submit an application to a regulatory agency if it wishes to acquire or be acquired by a non-bank financial institution. The regulatory agency would review the application under the usual criteria including CRA performance. As it stands now, H.R. 10 does not stipulate that mergers among banks and non-bank financial institutions will be reviewed on CRA grounds (earlier versions of H.R. 10 had provisions requiring these reviews). NCRC strongly believes that such a review should be customary as is the current practice of reviewing merger applications of depository institutions for CRA compliance. In the absence of these reviews, progess in community reinvestment is threatened because depository institutions with poor CRA records would be allowed to merge with non-bank financial institutions.

… Qualified Bank Holding Companies Must Offer Lifeline Banking Accounts

Rep. Maxine Waters¹ amendment passed on voice vote in the Banking Committee that would require qualified bank holding companies to offer low-cost ³lifeline² banking services. States such as New Jersey have laws requiring that banks offer low-cost checking accounts and other services. Financial modernization will vastly expand the profitable opportunities of bank holding companies. It is not only fair, but also economically feasible to require bank holding companies to offer low-cost services for low-income customers since they will be reaping tremendous gains as a result of entering new lines of businesses.

… Extending CRA to Wholesale Financial Institutions

Under H.R. 10, CRA coverage would be extended to wholesale financial institutions. Wholesale financial institutions (WFIs) would not be federally insured and would only accept deposits of $100,000 or more. If WFIs are not covered by CRA, holding companies would be tempted to shift assets from CRA-covered depository institutions to WFIs. The result would be a diminished base of deposits and assets that would be available for CRA-related lending and investments. This would be clearly contrary to the wishes of the Banking Committee to preserve and expand the resources available for community reinvestment.

… Mandating an Advisory Council on Community Revitalization

H.R. 10 establishes an advisory council on community revitalization that would examine the impact of the bill on community reinvestment and issue annual recommendations to Congress for increasing access to credit and capital for traditionally underserved populations. This advisory council has a critical role to play in reviewing the impact of financial modernization. Since the impacts of such a dramatic change in our nation¹s banking laws cannot be assessed in advance, it is crucial that Congress establish a process for measuring the impacts and suggesting changes to the law if unforeseen negative impacts occur. Thus, the advisory council must be in any final financial modernization bill that passes the House.

The advisory council on community revitalization must have three members appointed by the Secretary of Treasury that represent community reinvestment organizations (the current version of H.R. 10 only specifies that two members are community representatives). One of the organizations should be a well-established, nationally-recognized community reinvestment trade association and the other two should be renowned local organizations in different parts of the country.

… Data on Insurance Policies Sold by Nationally Chartered Banks Must be Publicly Disclosed

H.R. 10 may be amended to require states to allow nationally-chartered banks to offer any insurance product they could underwrite as of January 1997. If H.R. 10 is amended in this manner, national bank business in these insurance products is effectively regulated at the federal level, not the state level. Since federal regulatory authority mandates disclosure of home mortgage data, any bank insurance activity permitted under federal statute also should be accompanied by data disclosure requirements. In other words, national banks must be required to disclose the race and income level of the purchasers of their insurance policies as well as the census tracts in which the insurance policies were issued.

… Maintaining the Walls Separating Commere and Banking

We applaud the Commerce Committee¹s deletion of provisions allowing affiliations among banks and non-financial corporations. Combinations of banking and commerce are anti-competitive and would be harmful to consumers. In addition, they could thwart progress in CRA since banks would be tempted to lend to their non-bank commercial affiliates instead of small businesses in disadvantaged communities. NCRC believes that the Commerce Committee should go the final step and require securities companies and all other financial corporations to divest of their non-financial businesses if they wish to merge with depository institutions.

The reinvestment provisions suggested by NCRC represent the minimal level of reinvestment obligations that would be acceptable to NCRC and its members. When I testified before the House Banking Committee this past summer, I stated that CRA should be extended to all financial institutions permitted to affiliate with banks. Since that approach was not adopted by the House Banking Committee, these narrower reinvestment provisions represent an incremental approach that could be expanded upon at a later date. If H.R. 10 does not include an incremental approach to strengthening reinvestment obligations, then NCRC and its 620 member organizations will contact you in opposition to H.R. 10.

These improvements do not seek any type of government subsidy nor any social agenda. Instead, these changes simply contribute to a level playing field that allows more working class Americans to access those resources that will build their individual net wealth and create more stakeholders and taxpayers in traditionally underserved neighborhoods.

A remarkable consensus is emerging regarding the importance of CRA and expanding community reinvestment obligations to non-federally insured institutions. Policymakers as diverse as Rep. Jim Leach and Comptroller of the Currency Eugene Ludwig have publicly endorsed the expansion of community reinvestment obligations. NCRC and its members sincerely hope that you and the House leadership act on the emerging bipartisan consensus to strengthen CRA and thereby increase the resources available for the revitalization of low- and moderate-income communities.

Sincerely,

John Taylor

President and CEO

cc.

The Honorable Jim Leach

Chairman, House Banking and Financial Services Committee

All members of the House Commerce Committee

Minority members of the House Banking Committee

HOUSE COMMERCE COMMITTEE

(PHONE IS FIRST NUMBER, FAX IS SECOND)

REPBULICANS

Joe Barton, TX 202-225-2002/202-225-3052

Brian Bibray, CA 202-225-2040/202-225-2948

Michael Bilirakis, FL 202-225-5755/202-225-4085

Thomas Bliley, Jr., VA 202-225-2815/202-225-0011

Richard M. Burr, NC 202-225-2071/202-225-2995

Tom Coburn, OK 202-225-2701/202-225-3038

Christopher Cox, CA 202-225-5611/202-225-9177

Michael Crapo, ID 202-225-5531/202-225-8216

Barbara Cubin, WY 202-225-2311/202-225-3057

Nathan Deal, GA 202-225-5211/202-225-8272

Greg Ganske, IA 202-225-4426/202-225-3193

Paul E Gillmor, OH 202-225-6405/202-225-1985

Jim Greenwood, PA 202-225-4276/202-225-9511

J. Dennis Hastert, IL 202-225-2976/202-225-0697

Scott Klug, WI 202-225-2906/202-225-6942

Steve Largent, OK 202-225-2211/202-225-9187

Rick Lazio, NY 202-225-3335/202-225-4669

Charles Norwood, GA 202-225-4101/202-225-0279

Michael G. Oxley, OH 202-225-2676/202-226-0577

Bill Paxon, NY 202-225-5265/202-225-5910

James E- Rogan, CA 202-225-4176/202-225-5828

Dan Shaefer, CO 202-225-7882/202-225-7885

John M- Shimkus, IL 202-225-5271/202-225-5880

Cliff Stearns, FL 202-225-5744/202-225-3973

W.J. ³Billy² Tauzin, LA 202-225-4031/202-225-0563

Fred Upton, MI 202-225-3761/202-225-4986

Rick White, WA 202-225-6311/202-225-3524

Edward Whitfield, KY 202-225-3115/202-225-3547

DEMOCRATS

Rick Boucher, VA 202-225-3861/202-225-0442

Sherrod Brown, OH 202-225-3401/202-225-2266

Diana DeGette, CO 202-225-4431/202-225-5657

Peter Deutsch, FL 202-225-7931/202-225-8456

John D- Dingell, MI 202-225-4071/202-226-0371

Eliot Engel, NY 202-225-2464/202-225-5513

Anna G- Eshoo, CA 202-225-8104/202-225-8890

Elizabeth Furse, OR 202-225-0855/202-225-9497

Bart Gordon, TN 202-225-4231/202-225-6887

Gene Green, TX 202-225-1688/202-225-9903

Ralph M- Hall, TX 202-225-6673/202-225-3352

Ron Klink, PA 202-225-2565/202-226-2274

Thomas J- Manton, NY 202-225-3965/202-225-1909

Edward J- Markey, MA 202-225-2836/202-226-0340

Karen McCarthy, MO 202-225-4535/202-225-4403

Frank Pallone, Jr-, NJ 202-225-6190/202-226-1331

Bobby Rush, IL 202-225-4372/202-226-0333

Thomas C- Sawyer, OH 202-225-5231/202-225-5278

Ted Strickland, OH 202-225-5705/202-225-5907

Bart Stupak, MI 202-225-4735/202-225-4744

Edolphus Towns, NY 202-225-5936/202-225-1018

Henry A- Waxman, CA 202-225-3976/202-225-4099

Albert R- Wynn, MD 202-225-8699/202-225-8714

COMMITTEE ON BANKING AND FINANCIAL SERVICES

Henry B- Gonzalez, TX 202-225-4247

John J- LaFalce, NY 202-225-3231

Bruce F- Vento, MS 202-225-6631

Charles E- Schumer, NY 202-225-6616

Barney Frank, MA 202-225-5931

Paul E- Kanjorski 202-225-6511

Joseph P- Kennedy, MA 202-225-5111

Floyd H- Flake, NY 202-225-3461

Maxine Waters, CA 202-225-2201

Carolyn B- Maloney, NY 202-225-7944

Luis V- Gutierrez, IL 202-225-8203

Lucille Roybal-Allard, CA 202-225-1766

Thomas M- Barrett, WI 202-225-3571

Nydia M- Velazquez, NY 202-225-2361

Melvin Watt, NC 202-225-1510

Maurice Hinchey, NY 202-225-6335

Gary Ackerman, NY 202-225-2601

Ken Bentsen, TX 202-225-7508

Jesse Jackson, Jr-, IL 202-225-0773

Carolyn Kilpatrick, MI 202-225-2261

James Maloney, CT 202-225-3822

Darlene Hooley, OR 202-225-5711

Julia Carson, IN 202-225-4011

Robert Weygand, RI 202-225-2735

Brad Sherman, CA 202-225- 5911

Estaban E- Torres, CA 202-225-5526

Bernie Sanders, I-VT 202-225-4115