jsilver at essential.org
02-19-1999, 08:35 AM
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 slow down and 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 calling your Representatives and Senators to oppose both HR
10 and anti-CRA bills. The capitol hill switchboard number is (202)
224-3121.
Movement will be fast. Representative Jim Leach (R-IA), chairman of the
House Banking Committee, has scheduled a mark-up of HR 10 on March 4. Rep.
John LaFalce, the Ranking Member of the House Banking Committee, has
introduced his own version of financial modernization, HR 665. HR 10 and
HR 665 are similar in their treatment of CRA, and differ mainly in
structural issues (HR 10 promotes a bank holding company structure, and HR
665 favors an operating subsidiary structure). Rep. Bill McCollum (R-FL),
also on the House Banking Committee, has introduced anti-CRA bills.
Senator Phil Gramm (R-TX), chairman of the Senate Banking Committee,
released a draft version of financial modernization on February 16. He has
scheduled a mark-up on March 3. Senator Gramm has a version of safe
harbors in his draft that will make it much harder for community groups to
comment on bank mergers. He has also labeled his anti-extortion amendment
as an "issue for discussion." The amendment would throw bankers in jail
for up to one year and/or levy a one million dollar fine if they attempt to
influence community group testimony presented to regulatory agencies.
Community groups accepting grants in return for favorable testimony would
face the same penalties.
It is imperative for community organizations to contact their Senators and
voice their strenuous objections to the Gramm amendments, especially since
they are in draft form. The Senator may drop them if he senses strong
opposition by his colleagues.
The National Community Reinvestment Coalition (NCRC) is the nation's CRA
trade association of more than 680 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 HR 10 or anti-CRA bills.
Talking Points on HR 10 and anti-CRA bills
… 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 entities 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.
… HR 10 does expand CRA to wholesale financial institutions, that would be
a new type of investment banks which 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. State Farm's 16,000 insurance sales offices
throughout the country will sell and originate 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 Illinois. If financial modernization does not
expand CRA to cover the banking activities of mortgage 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.
… Enemies of CRA will propose various anti-CRA amendments and bills this
spring. One favorite is small bank exemptions. Exempting small banks from
CRA would eliminate community reinvestment requirements for most of the
banks in the country. This would result in a new round of capital and
credit flight from small towns and rural areas.
… Another anti-CRA amendment is safe harbors. Safe harbors exempt banks
with Satisfactory and Outstanding ratings from CRA reviews during the
merger application process. First of all, these ratings can be out-of-date
and up to two years old. Secondly, CRA reviews are critical in order to
ensure that community reinvestment performance is preserved after merging
banks experience tremendous institutional changes usually affecting several
cities and rural areas.
… Rep. Bill McCollum (R-FL) currently has two bills, HR 173 and 190, that
contain safe harbors and small bank exemptions. HR 190 would also seriously
weaken fair lending enforcement in the country by effectively preventing
the use of data and statistics during fair lending investigations and
litigation.
… 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 U.S. 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.
Major Provisions of Senator Gramm's Draft Version of Financial Modernization
… Prohibition on Extortion and Bribery provision - It shall be unlawful for
a bank to "intentionally motivate, encourage, or influence the testimony of
any person, group, or other organization" before a Federal banking agency.
It would be illegal to issue a grant or to establish a quota or set-side
with respect to employment, sales, or purchases for the benefit of a
community group or any other party that, in return, made a favorable
comment to a regulatory agency. Penalties are incredibly stiff and
unprecedented. A banker could be fined $1 million and/or imprisoned for
one year. The community group receiving a grant or set-aside would face
the same penalties, and would have to hand over any grants to the Federal
government. (Oddly, loans to community groups making comments to
regulatory agencies are permissible.)
… The occurrence of greenmail is very rare, and is renounced by NCRC's 680
community organizations. If community groups, CDCs, credit unions, or
intermediaries receive funding from a CRA agreement, the funding is
dedicated for homeownership counseling or some other service that helps
banks serve low- and moderate-income areas -- not for being silent or
supportive of a merger application. A so-called anti-extortion amendment
would interfere with the democratic right of citizens to express their
views to federal regulatory agencies.
… 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 matter
bears the burden of proof in demonstrating that CRA performance is below
Satisfactory.
… This version of safe harbors would render comments on pending mergers
meaningless. For example, if a large bank has Satisfactory ratings, 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 its tests
(lending, investments, and services). An overall grade of Satisfactory
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.
… The Gramm draft removes the modest requirement that a bank must have at
least a Satisfactory rating in order to engage in insurance and securities
activities.
LaFalce's Version of Financial Modernization - HR 665
… Reinstates a sanction for bank holding companies with depository
subsidiaries with below Satisfactory CRA ratings. In these cases, the
Federal Reserve Board has the authority to require divestiture of insurance
and securities subsidiaries or affiliates, or the cessation of their
activities.
… Provides an operating subsidiary option - Banks can create subsidiaries
that underwrite securities or sell insurance. Insurance underwriting would
have to occur in a holding company affiliate. For CRA purposes, the
operating subsidiary option is preferable since the assets of subsidiaries
are considered with the assets of the bank when CRA examiners are
determining the financial resources available to banks for CRA activities.
Remember, however, this is not a direct application of CRA to the operating
subsidiaries.
… NCRC's basic objection remains. CRA-like obligations are not directly
applied to mortgage companies, insurance companies, securities firms or
other insitutions allowed to affiliate with banks.
… HR 665 would allow bank holding companies to own non-financial commercial
corporations. The commercial company revenues would be no greater than 15
percent of the holding company revenues. NCRC has opposed the mixing of
banking and commerce because banks would favor their commercial affiliates
over other companies, including those independent small businesses owned by
women or minorities.
Call or Write Today!
… Ask you Senator or Representative how they stand on the anti-CRA and fair
housing amendments and bills. Ask them if they will support pro-CRA and
pro-HMDA amendment to HR 10. Share the responses with NCRC.
… Please carbon copy NCRC on your letters to Senators and Representatives.
We stand ready to help on (202) 628-8866.
This post transferred from the cdb-l mailing list
Financial Modernization and anti-CRA Bills
Dear Friends of Community Reinvestment:
Small business, affordable housing, and economic development lending and
investing will slow down and 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 calling your Representatives and Senators to oppose both HR
10 and anti-CRA bills. The capitol hill switchboard number is (202)
224-3121.
Movement will be fast. Representative Jim Leach (R-IA), chairman of the
House Banking Committee, has scheduled a mark-up of HR 10 on March 4. Rep.
John LaFalce, the Ranking Member of the House Banking Committee, has
introduced his own version of financial modernization, HR 665. HR 10 and
HR 665 are similar in their treatment of CRA, and differ mainly in
structural issues (HR 10 promotes a bank holding company structure, and HR
665 favors an operating subsidiary structure). Rep. Bill McCollum (R-FL),
also on the House Banking Committee, has introduced anti-CRA bills.
Senator Phil Gramm (R-TX), chairman of the Senate Banking Committee,
released a draft version of financial modernization on February 16. He has
scheduled a mark-up on March 3. Senator Gramm has a version of safe
harbors in his draft that will make it much harder for community groups to
comment on bank mergers. He has also labeled his anti-extortion amendment
as an "issue for discussion." The amendment would throw bankers in jail
for up to one year and/or levy a one million dollar fine if they attempt to
influence community group testimony presented to regulatory agencies.
Community groups accepting grants in return for favorable testimony would
face the same penalties.
It is imperative for community organizations to contact their Senators and
voice their strenuous objections to the Gramm amendments, especially since
they are in draft form. The Senator may drop them if he senses strong
opposition by his colleagues.
The National Community Reinvestment Coalition (NCRC) is the nation's CRA
trade association of more than 680 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 HR 10 or anti-CRA bills.
Talking Points on HR 10 and anti-CRA bills
… 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 entities 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.
… HR 10 does expand CRA to wholesale financial institutions, that would be
a new type of investment banks which 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. State Farm's 16,000 insurance sales offices
throughout the country will sell and originate 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 Illinois. If financial modernization does not
expand CRA to cover the banking activities of mortgage 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.
… Enemies of CRA will propose various anti-CRA amendments and bills this
spring. One favorite is small bank exemptions. Exempting small banks from
CRA would eliminate community reinvestment requirements for most of the
banks in the country. This would result in a new round of capital and
credit flight from small towns and rural areas.
… Another anti-CRA amendment is safe harbors. Safe harbors exempt banks
with Satisfactory and Outstanding ratings from CRA reviews during the
merger application process. First of all, these ratings can be out-of-date
and up to two years old. Secondly, CRA reviews are critical in order to
ensure that community reinvestment performance is preserved after merging
banks experience tremendous institutional changes usually affecting several
cities and rural areas.
… Rep. Bill McCollum (R-FL) currently has two bills, HR 173 and 190, that
contain safe harbors and small bank exemptions. HR 190 would also seriously
weaken fair lending enforcement in the country by effectively preventing
the use of data and statistics during fair lending investigations and
litigation.
… 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 U.S. 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.
Major Provisions of Senator Gramm's Draft Version of Financial Modernization
… Prohibition on Extortion and Bribery provision - It shall be unlawful for
a bank to "intentionally motivate, encourage, or influence the testimony of
any person, group, or other organization" before a Federal banking agency.
It would be illegal to issue a grant or to establish a quota or set-side
with respect to employment, sales, or purchases for the benefit of a
community group or any other party that, in return, made a favorable
comment to a regulatory agency. Penalties are incredibly stiff and
unprecedented. A banker could be fined $1 million and/or imprisoned for
one year. The community group receiving a grant or set-aside would face
the same penalties, and would have to hand over any grants to the Federal
government. (Oddly, loans to community groups making comments to
regulatory agencies are permissible.)
… The occurrence of greenmail is very rare, and is renounced by NCRC's 680
community organizations. If community groups, CDCs, credit unions, or
intermediaries receive funding from a CRA agreement, the funding is
dedicated for homeownership counseling or some other service that helps
banks serve low- and moderate-income areas -- not for being silent or
supportive of a merger application. A so-called anti-extortion amendment
would interfere with the democratic right of citizens to express their
views to federal regulatory agencies.
… 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 matter
bears the burden of proof in demonstrating that CRA performance is below
Satisfactory.
… This version of safe harbors would render comments on pending mergers
meaningless. For example, if a large bank has Satisfactory ratings, 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 its tests
(lending, investments, and services). An overall grade of Satisfactory
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.
… The Gramm draft removes the modest requirement that a bank must have at
least a Satisfactory rating in order to engage in insurance and securities
activities.
LaFalce's Version of Financial Modernization - HR 665
… Reinstates a sanction for bank holding companies with depository
subsidiaries with below Satisfactory CRA ratings. In these cases, the
Federal Reserve Board has the authority to require divestiture of insurance
and securities subsidiaries or affiliates, or the cessation of their
activities.
… Provides an operating subsidiary option - Banks can create subsidiaries
that underwrite securities or sell insurance. Insurance underwriting would
have to occur in a holding company affiliate. For CRA purposes, the
operating subsidiary option is preferable since the assets of subsidiaries
are considered with the assets of the bank when CRA examiners are
determining the financial resources available to banks for CRA activities.
Remember, however, this is not a direct application of CRA to the operating
subsidiaries.
… NCRC's basic objection remains. CRA-like obligations are not directly
applied to mortgage companies, insurance companies, securities firms or
other insitutions allowed to affiliate with banks.
… HR 665 would allow bank holding companies to own non-financial commercial
corporations. The commercial company revenues would be no greater than 15
percent of the holding company revenues. NCRC has opposed the mixing of
banking and commerce because banks would favor their commercial affiliates
over other companies, including those independent small businesses owned by
women or minorities.
Call or Write Today!
… Ask you Senator or Representative how they stand on the anti-CRA and fair
housing amendments and bills. Ask them if they will support pro-CRA and
pro-HMDA amendment to HR 10. Share the responses with NCRC.
… Please carbon copy NCRC on your letters to Senators and Representatives.
We stand ready to help on (202) 628-8866.
This post transferred from the cdb-l mailing list